The Nvidia Chart Shows The Importance Of Earnings From Tesla, Meta, Microsoft, And Alphabet

To gain an edge, this is what you need to know today.

Importance Of Earnings

Please click here for an enlarged chart of NVIDIA Corp NVDA.

Note the following:

• Nvidia is the most important stock in this market as Nvidia is the center of the AI revolution.
• The chart shows Arora signals to take partial profits or hedge NVDA stock right near the top.
• The trendline on the chart shows that the upward trend in NVDA is now broken.
• The chart shows a big drop in NVDA stock on Friday.
• The chart shows NVDA has fallen about 21% from the peak in a short time.
• The chart shows that NVDA is still significantly above the breakout point.
• The chart shows the drop was on somewhat heavy volume but not extremely heavy volume. This is a negative.
• RSI on the chart shows that NVDA is now oversold. When a stock is oversold, often it tends to bounce.
• As full disclosure, NVDA is in The Arora Report's ZYX Buy Core Model Portfolio. The chart shows that members of The Arora Report bought NVDA stock at an average price of $125.51, just before the run up to $974.  Along the way, there were several opportunities for investors to participate in the rise in NVDA stock.
• In real life, it does not get any more perfect than buying at the low right before a big run up, holding through the run up, using trade around positions along the way to add to profits, and taking profits or hedging right at the top.
• The Arora Report's plan is to realize profits on NVDA hedges and add to NVDA at the appropriate time.
• A look at the NVDA chart shows the importance for the entire stock market of earnings this week from Tesla Inc TSLA, Meta Platforms Inc META, Microsoft Corp MSFT, Alphabet Inc Class A GOOGL, and Alphabet Inc Class C GOOG. Earnings from these stocks, with the exception of TSLA, are expected to be extremely strong.  Whisper numbers are higher than consensus numbers.
  • If earnings from these stocks are better than whisper numbers, expect a strong rally in the stock market from here.
  • If earnings from these stocks are worse than whisper numbers, expect the current move down to continue.
• As an actionable item, the sum total of the foregoing is in the protection band, which strikes the optimum balance between various crosscurrents. Please scroll down to see the protection band.

Magnificent Seven Money Flows

In the early trade, money flows are positive in Apple Inc AAPL, Amazon.com, Inc. AMZN, GOOG, META, and NVDA.

In the early trade, money flows are neutral in MSFT.

In the early trade, money flows are negative in TSLA.

In the early trade, money flows are positive in SPDR S&P 500 ETF Trust SPY and Invesco QQQ Trust Series 1 QQQ.

Momo Crowd And Smart Money In Stocks

The momo crowd is aggressively buying stocks in the early trade. Smart money is inactive in the early trade.

Gold

The momo crowd is selling gold in the early trade. Smart money is inactive in the early trade.

For longer-term, please see gold and silver ratings.

The most popular ETF for gold is SPDR Gold Trust GLD. The most popular ETF for silver is iShares Silver Trust SLV. 

Oil

The momo crowd is selling oil in the early trade. Smart money is inactive in the early trade.

For longer-term, please see oil ratings.

The most popular ETF for oil is United States Oil ETF USO.

Bitcoin

Bitcoin BTC/USD is being bought as the fourth halving has now occurred. There is disappointment among bulls because buying so far is not as strong as they had expected.

Protection Band And What To Do Now

It is important for investors to look ahead and not in the rearview mirror.

Based on individual risk preference, consider a protection band consisting of cash or Treasury bills or short-term tactical trades as well as short to medium term hedges and short term hedges. This is a good way to protect yourself and participate in the upside at the same time.

You can determine your protection bands by adding cash to hedges. The high band of the protection is appropriate for those who are older or conservative. The low band of the protection is appropriate for those who are younger or aggressive. If you do not hedge, the total cash level should be more than stated above but significantly less than cash plus hedges.

It is worth reminding that you cannot take advantage of new upcoming opportunities if you are not holding enough cash.  When adjusting hedge levels, consider adjusting partial stop quantities for stock positions (non ETF); consider using wider stops on remaining quantities and also allowing more room for high beta stocks. High beta stocks are the ones that move more than the market.

Traditional 60/40 Portfolio

Probability based risk reward adjusted for inflation does not favor long duration strategic bond allocation at this time.

Those who want to stick to traditional 60% allocation to stocks and 40% to bonds may consider focusing on only high quality bonds and bonds of seven year duration or less. Those willing to bring sophistication to their investing may consider using bond ETFs as tactical positions and not strategic positions at this time.

The Arora Report is known for its accurate calls. The Arora Report correctly called the big artificial intelligence rally before anyone else, the new bull market of 2023, the bear market of 2022, new stock market highs right after the virus low in 2020, the virus drop in 2020, the DJIA rally to 30,000 when it was trading at 16,000, the start of a mega bull market in 2009, and the financial crash of 2008. Please click here to sign up for a free forever Generate Wealth Newsletter.

This article is from an unpaid external contributor. It does not represent Benzinga's reporting and has not been edited for content or accuracy.