No buy signal on NVDA yet
Last week I flagged a skew divergence on NVDA to members, right as the stock hit new highs above 240.
The stock was making new highs, but skew was moving the other way. The options market wasn’t buying the rally.
Since then NVDA has dropped a quick 20 points to 220.
That one played out. The more useful question is what happens now.
Skew has moved further into puts. Vol has bounced, and realised vol has picked up with it. The options market is still leaning into the downside, and I don’t see a clear buy signal yet.
It’s the same thing I said about bonds a couple of weeks ago. Before I’d step into a long, I’d want to see the reverse of what flagged the top. Skew starting to come back while the price is still heavy. Vol coming back in. Those would tell me the fear is draining out of the move.
Neither has happened on NVDA so far, so I’m happy to wait.
The same vol read that warned me near the top is what I’ll use to look for the bottom. How that read works in both directions is part of my delta trades framework. What divergence looks like at a high. What it looks like at a low.
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