EOT Trade Alert – December 9, 2009

| December 9, 2009

December 9, 2009

Trade Alert:

   Buy NVDA March 2010 $15 Calls at $1.80 or better (UVACC)

Company Background:

NVDIA (NVDA) is a “provider of visual computing technologies”.  They invented the GPU (graphic processing unit) that powers the highly detailed and lifelike graphics on personal computers, game consoles, and mobile devices.

Short-Term Catalyst:

Let’s get right to the point.

GPU’s are an essential part of the chip sets powering today’s electronics.  NVDIA’s a big player in the GPU market.  (It’s not a surprise since they invented them.)

Now it looks like they’ll be grabbing more market share than analysts thought.

This is really a story about Intel (INTC).

Intel recently scrapped plans for their version of a GPU set to be released in 2010.  The Larrabee chip design is Intel’s first foray into GPU, but it won’t be their last.

Unfortunately for Intel, the Larrabee project hit snag after snag.  With Intel sidelined, NVDIA will be picking up a good piece of the market share Intel would have had.

There’s also the possibility of Intel deciding to buy NVDIA.  It’s obvious Intel is itching to get into the GPU market but their in-house development didn’t work out.

Either way, this is a good thing for NVDIA’s stock.  It’s already moving higher.  They’ll either have strong 2010 sales or Intel buys them.  Looks like a win – win situation to me.

NVDA stock has a good technical setup as well.  It’s in a confirmed uptrend.  And the stock gapped higher on Monday, then pulled back a little yesterday.  Looks like a good entry point to me.

Trade Details:

Option Ticker Symbol: UVACC
Underlying Stock Symbol: NVDA
Current Bid-Ask Price: $1.65 – $1.69
Option “Buy Up To” Price: $1.80
Break-Even On Stock At Expiration: $16.80
Maximum Risk Per Contract: $180

Exit Strategy:

NVDA is trading at $15.31 per share.  Resistance levels will be at $18 and again at $20.  Remember, we want this stock to move higher.  Support levels will be at $13 and $12.  Conservative investors should look to exit at the first support or resistance level. Aggressive investors may want to hold for a bigger move.



Category: EOT Trade Alert

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