Big Tech’s Recovery Is Coming Under Intense Pressure By Larry Benedict, editor, The Opportunistic Trader On Wednesday, we closed out half our Nvidia (NVDA) put option position. We entered the trade on August 12, and the position initially moved against us. But after its mid-month rally, NVDA’s price action has been telling… NVDA has repeatedly tried to break out to fresh highs. But it instead ran into a wall of short-term resistance. You can see that in the horizontal orange line in the chart below. The market was bullish about NVDA coming into Q2 earnings this week. But it just couldn’t gain any traction above $130…
Nvidia (NVDA) 
Source: eSignal
(Click here to expand image) This action reconfirmed something that I’ve been saying for months… That the market has simply bid up Big Tech stocks too far. And now it’s balking at paying for ever more unsustainable price-to-earnings (P/E) multiples. Going into earnings, our position was underwater. So we thought it prudent to cut it in half. That meant locking in a 70.4% loss on the first half of the trade. We also wanted to keep some exposure, though, in case the trade moves back in our direction… Just look at the Relative Strength Index (RSI). It recently dipped below support (green line). While it’s still early days, the market sold down NVDA 6.3% by yesterday’s close. That drop came despite another blockbuster earnings result – something the market has become used to with NVDA. Therein lies the challenge for NVDA (and other expensive tech stocks). Huge revenue and earnings growth has propelled NVDA exponentially higher over the last couple of years. Yet it also leaves it increasingly vulnerable to any shock or disappointment. We’ll continue to monitor the remaining position closely and be in touch the moment you need to act. The same is true with our put option position on the Invesco QQQ Trust Series 1 (QQQ) and our other half position remaining in Apple (AAPL). Now, though, let’s turn our attention to the ProShares Bitcoin Strategy ETF (BITO), where we opened a put option position back on July 16... Testing Resistance As you can see below, BITO kept rallying after we entered the trade. But after peaking and reversing, it made a lower high on August 23. The 50-day moving average (MA, blue line) is still trending lower. The 10-day MA (red line) is bearishly tracking below it. This has kept our trade mainly in the green… ProShares Bitcoin Strategy ETF (BITO) 
Source: eSignal
(Click here to expand image) But the RSI has been trending higher. It recently tested resistance (green line). And what happens here will be key… A rebound lower will show that buying momentum is still slipping. That would add further weight to BITO’s stock price and help our position. As with our other trades, I’m watching this one closely and will be in touch as soon as it’s time to act. Inflation and Jobs With NVDA earnings out of the way, our attention turns to the latest Personal Consumption Expenditures (PCE) inflation data… That will play into next month’s rate cut. We don’t know yet whether that cut will be 0.25% or 0.50%. PCE increased 0.2% month over month (MoM) and 2.5% year over year (YoY) compared to expectations for a 0.2% MoM increase and a 2.6% YoY increase. So far, the cooling trend continues, which leaves a larger cut potentially on the table. And next week will all be about jobs – another key area of the economy the Federal Reserve watches closely… On Wednesday, we’ll learn the latest job openings data, followed by jobless claims on Thursday. Then the big-ticket items come Friday with nonfarm payrolls (NFP) and the unemployment rate. Next week could be shaping up for another active period. So please keep an eye out for new trades. And if you have questions, suggestions, or comments, you can reach out to me at feedback@opportunistictrader.com. Happy Trading, Larry Benedict
Editor, The Opportunistic Trader | 
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