The top Republican on the House China committee has written to US Commerce Secretary Howard Lutnick, opposing the restart of Nvidia H20 chip shipments to China. Nvidia’s stock has had ups and downs this week, hitting a record high of $174.25 but currently sits at $172.37. This week, Nvidia’s shares rose 4.54%, bringing their annual increase to 28.29%. Since April, Nvidia’s price has been on the rise, staying above its 50-hour moving average of $167.69. The 100-hour moving average, at $162.56, is providing support.

Nvidia Moving Averages

In June, Nvidia’s price fell below the 50-hour moving average but found support at the 100-hour moving average. These moving averages play a crucial role in setting support levels, which can signal possible shifts in the stock’s direction. Traders are closely monitoring these support levels for signs of future market changes. The strong investment in AI supports Nvidia’s growth, yet traders are wary of potential price corrections. If prices drop below these key support levels, focus will shift to other correction targets. There’s a clear tension between Washington’s views on chip sales and the market’s optimism for AI demand. The objection from Representative Michael McCaul introduces some risk that could lead to quick price changes. This makes options pricing, or implied volatility, more sensitive to news about chip exports.

Trading Strategies

Given the solid upward trend, we think buying call options or selling put credit spreads during dips toward support is a smart move. As long as the price stays above the 50-hour moving average, the easiest path seems to be upward. Recent information shows that major cloud providers like Microsoft and Google expect their capital spending to exceed $200 billion in 2024, a large part of which will go towards AI hardware. On the other hand, the stock’s near-record high and the congressman’s letter present a chance for more bearish strategies. We would consider buying put options if the price decisively falls below the 100-hour moving average at $162.56, which has been a critical support area in the past. With 30-day implied volatility currently near 48%, even a small decline could lead to significant profits from put options. For those unsure of the immediate price direction but anticipating a big move, long volatility strategies could be beneficial. A long straddle—buying both a call and a put option with the same strike price and expiration—might work well. This approach profits from large price swings in either direction, benefiting from the strong fundamental trends and uncertain geopolitical risks. We’ve seen this before, like in October 2023 when restrictions on advanced chip sales led to a temporary sell-off before the uptrend resumed. Historically, while political events can cause short-term dips, the market has consistently focused on the strong long-term demand for AI infrastructure. Therefore, we view any politically-driven drops toward key moving averages as potential buying opportunities until the technical indicators suggest otherwise. Create your live VT Markets account and start trading now.

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