Why I Want to Adjust My Position in Nvidia
The buy-or-sell decision is coming to the forefront as market action deteriorates.
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It is a tough slog on Wednesday morning with breadth of more than three-to-one negative and Magnificent Seven names trading down 0.6%. Texas Instruments TXN had a good earnings report and is helping some of the chip names, but the Big Kahuna, Nvidia NVDA, is weak.
Small caps are weak but aren’t underperforming like they have been for the last two days. New 12-month highs have dropped to just 110 names, which reflects how positive momentum has dried up.
My game plan is to manage positions carefully and to prepare for upcoming earnings reports. Do I want to increase the cut-back position size as we move closer to an earnings date?
The questions that traders always have to grapple with when the action turns weaker is whether to take a stop and avoid the risk of further downside or look for an opportunity to buy more of a position they like. That is the problem, the most difficult question that traders confront on a daily basis, and there is no easy answer.
Typically, I find it better to err on the side of selling pullbacks rather than buying more because I can always buy it back if I have to pay a higher price; that is simply the cost of insurance to avoid the risk of a much bigger drop.
I discussed Hims & Hers HIMS on Monday as a stock that I think could make a run into its earnings report on November 4. I have already reduced my position a little to strength, and my plan is to buy more shares as the chart develops. It is down about 5%, as I am right, but I don’t see any immediate support. I will give it more time to find a support point, and then I’ll add a small buy and continue to look for more. With earnings coming up very soon, it shouldn’t sell off too deeply, but if it closes poorly, I’ll reevaluate.
Another stock I’m evaluating for a buy or a reduction right now is Nvidia NVDA. We have had a very good run there, and I’m more likely to reduce a bit now and then look for a reentry lower, but my position size isn’t that large, so my sales won’t be very big. I just want to adjust the position size to reduce short-term risk and then add back when we see better technical development.
I go through a similar process with all holding and make the decision to either buy more or reduce. I want to avoid indecision.
It is getting uglier out there quickly, and bids are starting to disappear.
At the time of publication, DePorre was long HIMS and NVDA.
