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Wednesday, June 29, 2022

How Nvidia Stock Looks Heading Into Q1 Earnings Print

NVIDIA Corporation NVDA is set to print its first-quarter financial results after the market closes on Wednesday.

When the semiconductor company printed its fourth-quarter results on Feb. 16, the stock gapped down over 6% to start the following trading day, but closed that session up 13% off the open.

For the fourth quarter, Nvidia printed a big beat, reporting non-GAAP earnings per share of $1.32 on revenues of $7.64 billion, which beat the consensus estimate of $1.22 per share and revenues of $7.42 billion.

For the first quarter, the analysts estimate Nvidia will report earnings of $1.29 per share on revenues of $8.12 billion.

This month, seven analysts weighed in with adjusted price targets, with all but one lowering their targets to between $190 and $300. Morgan Stanley reinstated its Equal-Weight rating and announced a price target of $217.

The reaction Nvidia receives post-earnings is likely to be the deciding factor on whether the stock will trade in bullish or bearish territory for the time being, because although Nvidia has formed a bullish double bottom pattern, the stock is being held in a downtrend by a descending trendline.

Of course, holding stocks or options over an earnings print is akin to gambling because stocks can react bullishly to an earnings miss and bearishly to an earnings beat. Options traders, particularly those who are holding close dated calls or puts, take on extra risk because the intuitions writing the options increase premiums to account for implied volatility.

The implied move for options of Nvidia expiring this week is 10.80%.

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The Nvidia Chart: Nvidia was trading up over 5% higher heading into its earnings print, in reaction to a bullish double bottom the stock printed at the $157.55 mark on May 20 and Tuesday. If Nvidia receives a bullish reaction on Thursday, the stock will break through a bearish descending trendline that has been holding Nvidia down since April 20.

  • If Nvidia suffers a bearish reaction to its earnings, the double bottom pattern will be negated and the descending trendline is likely to push the stock lower within its downtrend. The most recent lower high was printed on May 17 at $183.17 and Nvidia will either have to rise up above that level or retrace to print a higher low in order to negate the downtrend.
  • Nvidia has developed exaggerated bullish divergence on the daily chart, which suggests the most likely scenario is for the stock to trade up higher over the coming days. Exaggerated bullish divergence occurs when a stock’s lows are flat, but its relative strength index forms a series of higher lows.
  • Nvidia has resistance above at $180.73 and $187.80 and support below at $161.37 and $145.75.

See Also: ‘It’s Not Been This Cheap Ever Before’: Why Pete Najarian Bought Nvidia Stock Ahead Of Earnings

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