The topic on everyone’s minds between Wednesday and Thursday was NVIDIA Corp (NASDAQ: NVDA) earnings.
I don’t care if you’re a day trader with a small account, a swing trader, a long-term investor or even, I venture to say, a person who doesn’t trade at all…
You were on the edge of your seat, waiting for NVDA to drop earnings Wednesday evening.
It was seemingly like everyone in the world went silent Wednesday afternoon in anticipation…
It has become the shot, or earnings report, heard ‘round the world.
Some have said the importance of NVDA’s earnings trumps the Fed’s next rate decision, and some major economic data.
As Shanna Sissel, founder and president of Banrion Capital Management, said,
It shouldn’t be a bellwether for the economy…But it has become one because of the size and the impact of the stock on the overall market.
And don’t count me out of the excitement… I had it on my Weekly Watchlist.
Here’s a blurb on NVDA from my email last Sunday:
By the way, if you missed that email, it contains my complete watchlist for the week. I send it out every Sunday, so don’t forget to check your inbox.
And if you want access to my other watchlists during the week, check out my StocksToTrade Advisory service.
So, as you now know, NVDA did report stellar earnings, but the market didn’t react favorably, sending the >stock down as much as 5% in after-hours trading.
What happened and why?
Should we still trade it?
Here Are Some Of The Details Of NVIDIA’s Earnings:
The company posted revenue of $13.51 billion for the quarter, an increase of 88% year-over-year.
Earnings per share (EPS) came in at $2.70, well above Wall Street’s expectations. The numbers weren’t just good—they were excellent.
And this wasn’t a one-time fluke. NVIDIA’s growth has been relentless, driven by its leadership in AI, gaming, and data centers.
With the rise of artificial intelligence, NVIDIA has positioned itself as the go-to supplier of the GPUs that power AI workloads. Their data center business alone saw a 171% year-over-year growth.
And here’s NVDA’s stock chart after the earnings release:
NVDA 2-Day, 5-Minute Candles Chart; SteadyTrade
A little bit ironic, don’t ya think?
Why was the stock down?
One word: expectations, expectations, expectations.
Analysts expected big numbers and NVDA delivered. In fact, they beat those expectations.
But the beat wasn’t big enough…
This is the curse for companies that continue to post fantastic results. NVDA has created a situation in which whatever numbers it posts will never be high enough and never exceeding expectations by a wide enough margin.
The bar has been set too high so NVDA will always disappoint in some way or another.
Imagine the poor kid who gets straight A’s every semester in school but it’s never good enough because his parents want A+’s. That’s NVDA.
Guidance may have also played a part…
While NVIDIA’s future looks bright, some investors might have been looking for even more aggressive forward-looking statements.
To get an idea of how big NVDA’s stock price swings can be after earnings, take a look at this chart over time. You can see how the market reaction keeps growing every quarter.
The company has set an unreachable precedent for itself.
And then there’s just simple profit-taking…
Traders were also doing some profit-taking. You’ve heard of “buy the rumor, sell the news?”
When a stock runs up before earnings, some investors will lock in gains immediately after the report, leading to a sell-off.
So do we trade NVDA, or not?
The answer is yes…But maybe not the way you think.
In all the anticipation yesterday afternoon leading up to of NVDA’s earnings release, our IRIS system posted this:
IRIS NVDA screenshot; IRIS Analytics
This came out around 2:00 pm Eastern.
Our proprietary AI trading tool knew beforehand that trading NVDA would be a bad idea.
But to be clear, IRIS’s instructions only meant you shouldn’t make a long trade in NVDA.
That didn’t mean not to short the stock or buy puts on it.
If you’re unfamiliar with IRIS, you should check it out. It’s our proprietary AI-driven platform. I specifically designed it for swing trading.
Subscribers to the IRIS program get weekly analyst reports, training webinars, and best of all, access to the IRIS system itself. The tool operates much like ChatGPT to produce screeners, trading plans, and more.
Though I originally designed it for swing trades, IRIS has evolved into a system that also provides all the tools you need for options trading.
So if you decide to buy puts on NVDA, IRIS is worth checking out.
Master your swing trading and options trading strategies with our AI-driven tool!
If options make you uneasy, here’s a recent post from my blog that should ease your fears.
They’re not that scary, and they’re great for traders with small accounts who want to get in on the price action of expensive stocks like NVDA.
So those are my thoughts on trading NVDA right now.
That’s not to say it won’t be perfect for a long swing trade in the future. So, stay tuned…
Have a great weekend, everyone. See you back here on Monday.
Tim Bohen
Lead Trainer, StocksToTrade