Quick update on NVDA and TSLA
TLDR: We’ve covered both Nvidia and Tesla previously as stocks you should considering adding to your portfolio, however we’ve seen some interesting options volatility. We cover what that means for the investor in the short term.
In the last couple of newsletters, we took a look at two runners. ‘Runners’ as we like to call them are stocks that have high probability to move, and move fast.
In one case, NVDIA, which we wrote about right before earnings. NVDIA has had multiple gains in such a short amount of time. If you missed one run-up, you could have caught another. NVDIA even kept its runner status right after earnings. Going into earnings some thought it would finally begin to pull back but it had more fuel in the tank to move nearly another 17%. If you were to get in back in October, your investment would have been up by 120%!
From October 2022 to December 2022: +74%
From January 2023 to February 2023: +65%
Post Earnings February 2023: +17%
NVDIA has given us several opportunities. With this last push we even had one of our readers reach out closing his NVDIA position for a +14% gain. The real question is will it continue to do so and when will we get another turn? When we look at the charts two things stand out:
A run-up always tends to pull back
Each consecutive run-up has marginally decreased
The second fact, leads us to believe NVDIA may be losing some steam. Everything comes back to test important levels and we’re near a catalyst that may certainly help push this stock down. On February 28, NVDIA filed a shelf offering of up to $10 billion. This is when companies raise capital for things like acquisitions, building infrastructure, refinancing debt, etc.
NVDIA has been the talk of the town in the tech and semiconductor sectors in relation to powering many things including AI. Time will tell what the capital will be used for but we’re guessing the future with artificial intelligence isn’t cheap and will impact the stock price in the near term.
Checkout our earlier NVDIA article here for where we believe we’re going with the stock price.
Our next runner, Tesla has seen similar success. It also has a long history of running up as we discussed in our previous newsletter here. WIth similar increases over time:
From July 2021 to November 2022: +98%
From March 2022 to April 2022: +65%
From January 2023 to February 2023: +108%
With March on our heels, some are looking for this rocket to continue moving higher. Tesla will be having their investor day on March 1st where information will be shared about future expansions. Will this be another catalyst to propel this further on top of its recent 100% run? No one knows for sure as Tesla has surprised many investors.
As with NVIDIA and the overall market, nothing goes up forever. Tesla has had a history of news leading to increases before we eventually see a pull back. We tend to call this ‘buy the rumor; sell the news,’ also known as buying the hype then selling to avoid any decline.
In August, when Tesla announced a 3-for-1 stock split (if you had 1 share of TSLA, you now have 3). If you bought based on this news, you saw the value of your Tesla shares increase by 12%. On the other hand if you held after buying based on this announcement, you were no better off than where you began. The ‘news’ was ultimately sold and Tesla shares decreased in value by 67%.
News cycles can help you make money. However with a 100% increase already, will investor day be the next catalyst to continue surprising investors? Diving deeper into the charts, we don’t foresee a lot more room for this to run further. From its current price of 205; we may see a +6% push towards 218 and see it stalling before coming back down to earth for a bit. We are watching the $160 range which is approximately a 22% re-tracement from existing levels to possibly catch the next 60 - 100% move up.