8/29 Daily Plan: Can NVDA's Upgrades help the Market beat negative September Seasonality?
Strong Fundamentals vs. Weak Seasonality
This week has seen the markets make some very large moves before and after NVDA earnings.
Many people got quite bearish before AND after NVDA’s earnings outcomes which sent the stock down about -7% after hours. This is understandable as most people focus about 90% of their attention on the stock price as that is the most practical data point to look at.
But I for those who were willing to take a look at the earnings data, there are different insights to be made. I was actually quite excited to see what their earnings outcome meant for the semiconductor sector in general. And more specifically, I did share my thinking with Members that NVDA would get upgraded by analysts after this quarter (link here - unpaywalled). Excerpt from below.
After I woke up in the morning, I saw that Wall Street had indeed upgraded the stock’s long-term target.
When Wall Street upgrades one of the market’s most valuable companies, sentiment is stabilized across the board. So it doesn’t matter that NVDA is down today, the market in general is now Up.
A falling stock based on tremendous earnings outcomes is based on overly high expectations. It doesn’t mean the decline is structural.
These days, options markets and market-makers control much of the day to day price action before there are breakouts/imbalances based on new catalysts.
Last night we talked about how the 120 Strike Puts on NVDA were going to be the next target for market-makers to render worthless after they rinsed the 130 Strike Calls.
Because there was substantial options bearish activity at the 120 level for NVDA, I talked about any decline in NVDA lifting it above that 120 area.
If it weren’t for statistically bad/weak seasonality in September, I would definitely vouch for adding bullish exposure (ETFs/individual names that are at my DCF Base Case or Under).
There are a lot of traps that I expect to be laid out in the coming weeks.
Make sure to subscribe, join as a member for level-headed analysis when things get turbulent. The market is extremely effective at shaking people out just before a recovery comes through. Through my notes, I hope to help you stay calm/stay focused on what I think is likely coming in markets.
Data/DCF Tables which I use to make my decisions are below. Any stock that trades below my Base Case, that is my general Buy Area for an intermediate-term hold. Anything that trades at/near my Bear Case or below it, I absolutely like it for a long-term hold.
I will give opinions on when to carefully Buy and my DCF tables serve this purpose. When to sell though is a personal/subjective decision. I can’t comment as much on that.
I expect September to be really volatile. Hope to help more good people navigate what is historically the hardest month throughout the year.
Members-Only Data For Making Objective Intermediate-Term/Longer Term Decisions (Shorter-Term Decisions will be discussed separately, when appropriate):