NVIDIA’s stock saw a robust rise on July 15th due to renewed sales of its advanced H20 AI chips to China, adding approximately 4% to its shares. This uplift was driven by positive market reassessments of NVIDIA’s revenue potential after uncertainties were alleviated by U.S. government assurances.
On July 14th, NVIDIA’s stock neared critical resistance levels, leading to bearish anticipation, which was overturned by strong news on July 15th. This resulted in a price increase, catching bearish traders off guard and affirming the bullish trend, supported by a significant positive delta of +41 million.
Institutional Buying in Mid July
Mid-July saw notable institutional buying, peaking on July 15th, with trading volume hitting 189 million shares alongside aggressive buying. This activity was mirrored by a positive Delta, indicative of buyer dominance, suggesting a maintained bullish outlook, though moderate caution for profit-taking remains prudent.
While NVIDIA displays bullish sentiment, recent sessions (July 16–18) have shown a moderation in buying momentum. Declining trading volume and lower Delta readings suggest possible consolidation. The proprietary AI analysis provides a +5 bullish score, indicating caution while maintaining positivity with mild partial profit-taking as an option.
Key levels such as an anchored VWAP at $170.44 and breakout support at $170 are crucial to monitor. Sustaining above these levels continues the bullish sentiment, while a drop below could prompt a retest of $166. Though broader markets show signs of cooling, NVIDIA remains resilient, highlighting the importance of careful analysis over reactionary selling.
Traders are advised to employ smart analytic tools for informed trading decisions, recognising the fallibility of any singular method. Sound analysis of technical patterns and fundamental events continues to guide market actions.
Opportunities for Derivative Traders
Based on our analysis, we believe the continued bullish sentiment, though now mixed with caution, presents specific opportunities for derivative traders. The moderation in buying momentum suggests that strategies like call debit spreads may be advantageous. This approach lets you participate in further upside from the resumed China chip sales while defining your maximum risk, which is prudent given the cooling in the broader tech index.
Recent options data reinforces this measured approach, with the put-to-call ratio for the stock remaining low, indicating more traders are positioned for a rise than a fall. However, implied volatility has decreased since the surge on July 15th, making selling premium an attractive option. This aligns with Levitan’s advocacy for disciplined risk management and could involve selling covered calls against an existing stock position to generate income during a potential consolidation phase.
We see the critical support level around $170 as a strategic pivot for setting up options trades. Selling cash-secured puts with a strike price just below this level could allow you to collect premium while the stock remains strong. A confirmed break below this price, especially with increasing negative delta, would be the trigger to consider buying protective puts to hedge long positions.
The market’s reaction to other high-performing stocks serves as a reminder that positive news doesn’t guarantee a continued rally. Historically, after sharp upward moves, this stock has often entered periods of sideways consolidation before its next leg up, a pattern we saw in late 2023. Such a range-bound environment would be ideal for strategies that profit from time decay, like iron condors, should a clear trading channel emerge.
