The Daily Breakdown looks at the selloff in Nvidia and semiconductors stocks, which had their worst decline since March 2020.
Tuesday’s TLDR
- Chip stocks were decimated
- But not all sectors were hurt
- Let’s look at Nvidia’s chart
What’s happening?
Yesterday’s action was wild as the QQQ ETF fell 2.9%. Semiconductors led the way lower, with the SMH ETF falling 9.8%, its worst day since March 2020. Large weightings of that ETF didn’t do much to help, either.
Nvidia tumbled 17%, Taiwan Semiconductor dropped 13.3%, and Broadcom fell 17.4%.
For semiconductor stocks, it was a bloodbath. For everyone else, it was largely okay. In fact, there were a lot of positives on Monday.
Bitcoin shook off the early selling pressure, falling about 0.5% yesterday and is now higher this morning. The Dow finished higher on the day, with 22 of its 30 components rallying on Monday, while 7 of the S&P 500’s 11 sectors also gained on the day.
Four of those seven sectors gained 1% or more in the session, while financials closed at an all-time high. Heck, even three of the Magnificent 7 finished higher on the day.
Monday was definitely a bad day for some investors, but depending on where you look, it wasn’t devastation in all directions.
Want to receive these insights straight to your inbox?
Sign up here
The setup — Nvidia
Nvidia’s decline wiped out almost $600 billion in market cap — a decline so big it would wipe out the entire value of a company like Netflix, Costco or MasterCard.
The decline meant that NVDA closed below its 200-day moving average for the first time since January 12th, 2023. In fact, it’s the first time it’s even touched its 200-day in more than two years — a rather stunning observation to say the least!
Nvidia shares are trading higher in pre-market trading, gains of which investors will want to see hold throughout today’s session.
For bulls, they want to see Nvidia regain the 200-day moving average, and ultimately, take out Monday’s high near $128 in an effort to make a larger push higher.
On the downside though, they have to be aware of Monday’s low at $116.70. A close below that — and particularly a flush below that level — suggest that momentum could remain with the bears in the short term.
Options
For options traders, calls or bull call spreads could be one way to speculate on a rebound. In this scenario, options buyers limit their risk to the price paid for the calls or call spreads, while trying to capitalize on a bounce in the stock.
Conversely, investors who expect more downside could speculate with puts or put spreads.
For those looking to learn more about options, consider visiting the eToro Academy.
What Wall Street is watching
GM – Shares of General Motors are trading slightly lower in pre-market trading. The firm beat on earnings and revenue expectations, and issued full-year guidance above analysts’ expectations. However, a large loss from its Chinese unit may be weighing on sentiment.
BA – After strike disruptions and a lot of turmoil in Q4, it may not be too surprising that Boeing missed earnings and revenue expectations. However, the stock is largely unchanged in pre-market trading. Shares are up 16.2% over the past three months, but are down almost 15% over the past year. Check out Boeing’s chart.
Disclaimer:
Please note that due to market volatility, some of the prices may have already been reached and scenarios played out.
