Case Study: A Successful Trade on NVIDIA Corporation (NVDA)

Trade Setup

In mid-2020, I noticed that NVDA was experiencing a significant increase in demand for its graphics processing units (GPUs) due to the growing adoption of artificial intelligence (AI), cloud computing, and gaming. The company’s revenue and earnings were consistently beating analyst estimates, and I believed its stock price would continue to rise.

Entry

On July 20, 2020, NVDA reported its Q2 2020 earnings, which beat analyst estimates by a wide margin. The stock price surged to a new all-time high of $449.62. I entered a long position at $455.50, with a stop-loss at $420.00, just below the previous support level.

Trade Management

As the trade progressed, I adjusted my stop-loss to lock in profits. On August 5, 2020, NVDA reached a new high of $493.49, and I raised my stop-loss to $460.00. This ensured that I would at least break even if the stock pulled back.

Exit

On September 2, 2020, NVDA announced a 4-for-1 stock split, which would take effect on September 18, 2020. I decided to take profits and closed my long position at $513.45.

Results

This trade resulted in a profit of $57.95 per share, or a 12.7% return on investment (ROI). The trade duration was approximately 44 days, which is relatively medium-term.

Key Takeaways

Risk management: Setting a stop-loss and adjusting it as the trade progressed helped minimize potential losses.
Fundamental analysis: NVDA’s strong revenue and earnings growth, driven by increasing demand for its GPUs, provided a solid foundation for the trade.
Technical analysis: The stock’s break out to a new all-time high after the Q2 2020 earnings report provided a clear buy signal.