NVIDIA’s stock has experienced a remarkable increase, appreciating over 60% since being purchased in April. The stock’s price correction ended at the Equal Legs zone, also known as the Blue Box Area. The company’s Elliott Wave analysis outlines a 7-swing pattern with a pullback to a buyers’ zone between 101.78 and 76.16. The correction completed at 83.65 and a further rally towards new highs was anticipated.
In under three months, the NVIDIA stock has continued to rally as predicted, reaching all-time highs. This rise is traced from the Blue Box buying zone after a strategic buy. There is a strong recommendation against selling the stock during any pullback, given its positive momentum.
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We believe the analysis predicting the rally from the Blue Box area was accurate, setting the stage for the next move. The stock has since validated this outlook by pushing to new all-time highs with significant momentum. Our perspective is that this upward trend remains firmly in place for the foreseeable future.
This technical strength is reinforced by the recent 10-for-1 stock split, which took effect on June 10, 2024. Such splits often attract a new wave of investors and can sustain positive sentiment in the weeks that follow. We see this event as a catalyst that supports the ongoing rally rather than marking a peak.
For derivative traders, we feel buying call options is a direct way to participate in the anticipated continued ascent. Given the recommendation against selling on pullbacks, these dips should be viewed as opportunities to initiate or add to long call positions at better prices. Managing entry points will be key to maximizing the potential of this strategy.
Alternatively, selling out-of-the-money put credit spreads or cash-secured puts could allow traders to collect premium while maintaining a bullish stance. The stock’s powerful run has kept implied volatility relatively high, which benefits options sellers. This strategy profits from price appreciation, sideways movement, and the passage of time.
Our confidence is further bolstered by blowout Q1 earnings reported in May, where revenue hit $26.04 billion, significantly beating estimates. This demonstrates that the stock’s meteoric rise is backed by incredible fundamental performance and demand for its technology. We see the technical picture and the business reality as being in perfect alignment.
Historically, market leaders have often seen continued strength after a stock split, and we anticipate a similar pattern. However, the leverage inherent in derivatives means traders must carefully manage their position sizing to navigate any short-term price swings. It is crucial to evaluate risk capacity before engaging with these powerful instruments.
