How To Trade Nvidia This Week

From a psychological standpoint, the hottest stock in the market, Nvidia NVDA, is hovering around two key levels heading into Wednesday’s trading session. Shares closed on Tuesday just above the $400.00 level at $401.11 after hitting an all-time high above $415.00 earlier in the day. 

From a trading perspective, it is quite likely that near-term momentum will build on either side of the $400 level on a clean break to the upside or downside. 

Valuation is extremely stretched here as NVDA is trading at more than 200x earnings and 25x sales, but this is a stock that most market participants are keen to own as the company appears incredibly well-positioned to capitalize on the boom in artificial intelligence. 

This thesis was proven out last week when NVDA reported a blowout quarter and guidance, sending the stock into the stratosphere. 

The second psychological level that the chip-maker is flirting with is the unicorn status of a $1 trillion market capitalization. On Tuesday, the company’s equity closed the trading day with a value of $992.00 billion. Whether Nvidia is a $980 billion company or a $1.01 trillion company is essentially irrelevant in terms of the fundamentals or its long-term prospects. 

Nevertheless, the combination of overtaking the $400 psychological level, the $1 trillion hurdle, along with the clamor and momentum surrounding the stock, could push NVDA up to $450 by the end of the week – even if on its face that would appear to be unlikely. 

Bullish momentum above $400.00 is a buy signal for traders this week, whereas below $400.00, this stock should probably be avoided on the long side for the time being.    

Featured photo by Resul Kaya on Unsplash.