How to Trade NVDA This Week

Over the next few days the CES 2025 tech show will be happening, with traders watching NVDA's events and presentations especially closely. It's without a doubt going to have a major impact upon NVDA's stock performance for weeks to come.

It's hard not to marvel at the potential for UBER and NVDA to partner in the automotive space, and not to think "bullish" when you see all the new technologies being revealed.

But my PFP (positioning, flows and price action) system tells a tale that can't be ignored. Let's dive into it.

Options Positioning in $NVDA

Heading into the event on Tuesday, we had the 140 TGS (top gamma strike) which is our first layer of support, with 145 and 150 standing out as major resistance levels, and a lot less fuel above 150.

I commented on the push above 150 yesterday during our live Benzinga Option School that I didn't think it would hold above 150 for long. This is simply because a) there was little positional fuel above 150, b) traders were selling calls hand over fist above 150 (up to 160) and c) only shares were buying heavily yesterday above 150.

What this translates to me is it will be hard for NVDA to retain gains above 150 or past 160 short term (without a major CES bullish catalyst). For it to be comfortable (as of this writing around 1:10PM Eastern on Tuesday) near the 140 TGS is not surprising. But what happens if it loses 140 today or in overnight action?

Simply put, below 140, puts are in control and that puts 135 and 130 into focus. Below that there is very little fuel for continued downside.

Thus, option positioning in NVDA is forecasting a high (post-CES) of 160 and a low of 130 with a solid chance of aggregating around the TGS at 140.

Price Action in $NVDA

Looking at the 5-minute chart below in NVDA over the last few sessions, we've seen solid gains on Friday and Monday ahead of CES, but impulsive selling today for most of the session with only a corrective bounce once the European session closed.

The impulsive selling to start the session and corrective bounce suggests that from a price action perspective, there is likely more downside action unless we get a bullish catalyst from CES soon. We could see it bouncing to the session VWAP around 145, but any corrective bounces should be met with more selling.

What this is translating to is a less than enthusiastic short-term reaction from CES thus far.

Flows in $NVDA

This is the most interesting, and in my opinion, contradictory part of NVDA's story today. I'd also like to note it was the opposite in terms of flows yesterday, so I've been witnessing a different story the last two days from the options market and shares market.

On Tuesday, shortly before the European close (11am Eastern), I noticed a strong surge in call buying/positive deltas while puts remained consistently long puts. Normally positive deltas suggest call buying and thus should lift the stock. This is why we have to tie in the story for Monday as well.

For Monday, I saw call selling (bearish) along with an almost similar amount of put buying (bearish).

What we take from this is the call buying/positive deltas on the day are the short calls being closed today (thus via long calls) as the juice/credit had been pulled out from today's selloff.

What is also interesting is that despite the bearish option flows on Monday, the stock gained until the last two hours of trading. This suggests the gains were due to share buying, not options. Today (Tuesday), traders are not piling on massive bearish bets, so today, I think shares are being dumped en masse, thus the options flow has been discordant with the share flow over the last two sessions.

How We're Trading $NVDA

I'd like to see how the market closes on the day before making a trade on NVDA. If we can recover 145, then there is some hope for a push back into 150 by tomorrow. But if we get another impulsive leg down, then I think 140 is on deck.

What I'd really like to see is how the positioning changes after Tuesday, which will be accounted for in our data models between 12-3am Eastern. Hence, on Wednesday morning, we'll see which strikes gained/lost as a result of CES on Tuesday, and thus where bulls and bears think NVDA is going next.

Overall, the response has been underwhelming from a PFP perspective, thus we're looking to sell rallies with corrective moves into resistance targeting 140. But we're open to 140 providing a strong bounce should it hold today and share buyers step in.

Because of the high IV premium from the event, we suggest not trading single legs as the IV drain will be significant. We recommend trading spreads to reduce IV risk or potentially BWB's (broken wing butterflies) which both reduces IV risk, but also takes advantage of it.

I'll share our live trade ideas in real time with our members of the Benzinga Option School or Trading Waves. We hope to see you there.

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