Danielle Shay on Trading NVDA, AMD, AVGO & TSLA into Earnings

SPEAKER_1 (0:00)

Let's go deeper on chip and tech hardware in this space in our tech spotlight. Danielle Shay is with me, VP of Options Simpler Trading. I'm glad you're here. So I was just reading some of the big laggards, right? With these big sell-offs, all double digits, 17, 20%.

Doesn't seem to be unusual for the group overall. What do you make of it? Why the sell-off? Was it merited? Is that the right move? 15% sell-off? What's going on?

Danielle Shay (0:25)

Well, you know, I think the moves this year have been extremely exaggerated, and a lot of it has to do with earnings. I mean, I feel like with MU in particular, there was just so much excitement going into earnings, and I know I, for one, had a great time trading it to the long side in the trading room for the anticipation going into earnings.

But after that earnings report, we barely saw the stock move. And so I think that the expectations were very high. And after that event, it appeared to me that that is really when the sell-off began. So I think that expectations are very high in this environment, and that's why we're seeing a big pullback in these names.

SPEAKER_1 (1:00)

Yeah, and I want to get to some of the specific names, but I think of a couple of things that sort of set it off too, right? The anthropic valuation, less than maybe what people thought. CXMT providing maybe some competition to the group in Asia.

Also, will rates be higher? That's another area. There's just several storylines that are hitting the group overall that to question whether the return on investment return on capital, if the capital spending is maybe just too much, the debt worries.

Danielle Shay (1:32)

Yes, that's correct. And from a technical standpoint as well, selling begets more selling. And so when you see pullbacks initially, the way that I manage it is I'm typically looking for a pullback from all time highs down into around the 21 EMA, the 34 EMA on the daily chart. But once we hit down into the 50 simple, that is such a critical support zone. And if and when we get a high-volume break of that level, that is when I switch from dip buying into shorting on a short-term standpoint. And if you look at SMH on the daily chart, we had that high-volume break a few days ago. And with the memory stocks, it happened before that. And so what ends up happening is when you see those critical support breaks with those negative news announcements, the selling begets more selling until we ultimately find support in the market.

SPEAKER_1 (2:22)

Well, let's talk about a name like Broadcom, for example. You said it's one of your favorite names for the long term, and you also like to trade it ahead of the earnings. So give me about the current situation on a name like Broadcom.

Danielle Shay (2:36)

So Broadcom is a fantastic example of one of these stocks that has done really well rallying going into earnings because we have that high anticipation and high expectation. And that trade, especially in the options market, has been working so well quarter over quarter for years. But what I have noticed is over the last three quarters, we've seen a situation where the stock has topped out around that earnings report. The stock rallies going into the earnings report. And then once the report hits, it's just not enough to send that stock higher. And so now at this point, we've had the last three earnings reports where we've seen this pullback after earnings. And consequently, we also have had critical support breaks on both the daily and the weekly chart. So at this point, Broadcom is down below support on the daily chart, which is not very favorable for the bulls. However, the long-term weekly chart, we still have a trend intact to the upside. So I'm eyeing that long-term plan. I'm eyeing the long-term consolidation in the weekly pullback to see if I can get buy at the 50 simple moving average on that weekly chart.

SPEAKER_1 (3:46)

Right.

And we'll hear from the company in early November.

Let's turn our attention over to AMD. We saw a swift pullback. You're watching the 50-day buying opportunity.

Danielle Shay (3:58)

So AMD is one of the semis right now that is still holding this critical zone, and right now it's teetering on the brink. And so the way that I do it is I'm looking for buyers to come in at that critical level, as of right now, it could still be a buy going into earnings because it's holding that zone. However, I will switch stance if it breaks that zone on high volume, especially if we have two trading days below the zone. So I think AMD, even though it has had a swift pullback, it's still holding those support zones on that daily chart. And of course, I still like it for long-term investment. So I'm eyeing this one as a buy due to the fact that it is holding that support zone.