NVIDIA Corporation (NASDAQ: NVDA) announces earnings tomorrow after the bell…
This is one of the best trading catalysts of the year.
My strategy.
The stock is on a multi-day losing streak as we approach tomorrow’s announcement.
There are two ways to trade this momentum.
Both have the potential for massive gains, you just have to choose your risk level.
Unless you want to trade both setups… that’s fine too.
How I’m trading the NVDA earnings.
My Play on RIVN
NVDA reports earnings on August 26, after one of the most divisive earnings seasons in history…
Investors are shifting their sentiment in the AI sector. They’re no longer rewarding outlandish AI spending unless there’s revenue to back it up.
A perfect example is the split sentiment we saw on July 29 when Meta Platforms, Inc. (NASDAQ: META) and Microsoft Corporation (NASDAQ: MSFT) announced earnings.
META’s advertising revenue grew, but the company is still spending an incredible amount on AI: $31.1 billion, which is roughly double what it spent last year.
As a result, the company’s cash flow fell from $8.55 billion to $784 million. That’s a huge drop. And the stock followed in kind.
On the flip side of the same coin, MSFT logged quarterly wins with Azure and Microsoft 365 Copilot. But more importantly, it didn’t change its AI spending forecast.
The stock shot higher after the data dropped and made new YTD highs.
NVDA is still the most famous AI stock in the market…
MSFT and META are in a similar boat, and their earnings reports led to extreme volatility in the charts…
No matter what the earnings say, I expect to see volatility after NVDA’s earnings. And volatility means we have more opportunity for trading gains.
2 Ways To Trade
Unlike some of my contemporaries, I will gamble in the market.
I call these trades “earnings lottos”.
Nobody knows how a stock will react once it drops earnings. That’s what makes it a gamble.
An earnings lotto trade has two main functions…
- It allows us to trade some of the most explosive setups in the market.
- It reminds us of the consequences that come from trading without a plan.
I only gamble with money that I’m prepared to lose.
And win or lose, I remember that these plays are inherently risky. I’ll never fully rely on a blindfolded trading strategy like this. It’s something that I like to do for fun, or to take the edge off.
Like my bet on the NY Knicks this year…
The other way I’m looking to trade NVDA, a process that uses an actual strategy, I’m waiting for the earnings to drop to ride the reaction.
I’m expecting NVDA to gap up or gap down, like META and MSFT. It’s possible the price doesn’t react much to the announcement… but it’s unlikely. There’s so much volatility and pressure in the market, everyone’s ready for an outsized move.
Once the crowd shows us where the sentiment lies, I’ll look at the possibility of a reversion trade. Remember, I like to go against the crowd to catch momentary pullbacks and rallies.
When a stock gets stretched too far in one direction, there’s always a pullback coming. It’s the same pattern over-and-over again.
Stay Street Smart,
Jeff Zananiri
*Past performance does not indicate future results, Not typical.
