If You're Selling, I'm Buying: The Nvidia Profit Opportunity in 3 Charts
Throughout his TradeSmith publications, Jason Bodner "teaches people how to fish" in the investing world by sharing the lessons he's learned on Wall Street, what's really going on behind the scenes in the markets, and how to start refining your own decision-making processes.
He does this through his in-depth video analysis and weekly updates, like the one he just published in his free Power Trends newsletter on March 23.
But when I was talking with Jason last week about the tech sector and the subject of Nvidia Corp. (NVDA) came up, he didn't need more than six words to tell me his thoughts: "If anyone is selling, I'm buying."
I covered Nvidia earlier this month with a look at the company's $10,000 chip powering artificial intelligence (AI) image generators and chatbots. Investment bank Citigroup projects that ChatGPT usage alone could bring Nvidia $3 billion to $11 billion in sales by the end of 2023.
Looking at both TradeSmith's tools and Jason's proprietary system, we can dive into the profitable situation building up for NVDA through three charts.
On Feb. 21, NVDA triggered an Entry Signal, noted by the green boxed arrow in the image below:
At the time, the stock was trading for $206.51. A month later, on March 21, it was trading for $261.99, climbing nearly 27%.
Now, if you didn't invest at the time the Entry Signal was triggered, that's okay. Our Health Indicator is designed to tell you at a glance the health of a stock at any point in time. Being in the Green Zone, NVDA is still considered a buying opportunity.
We also have a Strong Bullish rating on the stock, and our friends at LikeFolio have a Bullish rating on the stock as well.
Chart No. 2: Big Money Buys
In our conversation, Jason told me that he's bullish on Nvidia because he doesn't see a significant competitor and expects demand to continue to grow for the company's elite graphics and processors.
Big Money — the institutions, pension funds, and hedge funds that manage tons of cash — agrees with his bullish outlook.
Jason's system was built on spotting unusual activity among Big Money investors, and so far in 2023, buying activity for Big Money has been a sea of green:
If you're seeing some of the wealthiest and most experienced investing institutions in the world racing in and buying up NVDA, you know that they don't expect the stock to falter.
Chart No. 3: One of the Worst Sectors of 2022 Is Winning in 2023
The tech sector obviously had a rough 2022, so it's understandable if anyone is wary about wading into a tech investment like NVDA. But Jason recently shared how the narrative hangover that tech stocks are rocky investments isn't in line with the reality of what Big Money is doing.
Tech is one of the strongest sectors in his Quantum Edge system:
I'm starting to see a smattering of headlines related to it. But the media hasn't put the whole story together. And an awful lot of people still want nothing to do with tech stocks. They were burned in 2022. And they believe that – against a backdrop with slower growth and higher interest rates – tech remains vulnerable. Big Money hasn't seen it that way for months. And since Big Money is responsible for 70% to 90% of daily trading volume, I'd rather know where that money is going than what some talking head is saying.
In the eight trading sessions leading up to the Federal Reserve's decision to bump up interest rates again last Wednesday, tech was the strongest sector every single day. It was also the strongest sector the day of the announcement.
The chart below displays the Big Money buying (green bars) and selling (red bars) of the Technology Select Sector SPDR Fund (XLK), overlaid by the fund's performance in blue. As you can see, there has been a heck of a lot more buying going on in the tech sector than selling:
Selling did increase in March, but that's not surprising given the bank scare and the widespread sell-off during that time.
Jason says this established trend is conclusive: Big Money is investing in anticipation of higher stock prices in the market's top growth sector – technology.
So, in addition to the signals popping up for NVDA on its own, we're seeing that Big Money is bullish on the tech sector and has been buying heavily since the start of the year.
Enjoy your Monday,
Keith Kaplan CEO, TradeSmith
Even More Important Than Knowing When to Buy
We've just shown how tools and systems are building the case that NVDA is a buy... but a buy signal is only one element of making money in the stock market.
What took me a while to learn is that ALL of the money in trading and investing is determined by one thing:
WHEN YOU SELL.
Sure, things like solid fundamentals and good earnings matter...
But plenty of companies have those... and there's still no guarantee you'll end up making a profit if you sell at the wrong time.
The REAL money is ONLY made once you close your positions and have cold, hard cash in your pocket.
While filing your taxes and looking over your investing accounts, you probably felt that lesson hit closer to home than ever.
Knowing the opportune time to sell is predicated on a sell signal that I'm betting 99% of investors don't know about.
TradeSmith is not registered as an investment adviser and operates under the publishers' exemption of the Investment Advisers Act of 1940. The investments and strategies discussed in TradeSmith's content do not constitute personalized investment advice. Any trading or investment decisions you take are in reliance on your own analysis and judgment and not in reliance on TradeSmith. There are risks inherent in investing and past investment performance is not indicative of future results.
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