Nvidia could be poised for a bigger breakout, trader says

Positive U.S.-China trade headlines are giving the tech sector a boost, and the chips could ride the wave higher, says TradingAnalysis.com founder Todd Gordon.

“The sectors and the industries that are responding the best are tied to Asian technology production. Obviously, that’s going to be semis,” Gordon said Thursday on CNBC’s “Trading Nation”

The SMH, the ETF that tracks semiconductors, rose more than 3% on Thursday. Nvidia raced ahead of the group with a gain of about 7% and Gordon says it could continue to lead.

“Just to get the perspective and the context of how far we’ve come in this stock, it’s been a monster. You can see the stock has just absolutely skyrocketed here,” Gordon said.

The chart is showing an increasing higher low bottom, he noted, and when connecting the highs, you can see resistance has been broken.

“This dotted blue line is the 200-day moving average — kind of use it as a ski slope. We went up, retested, and I’m wondering if we’re about to launch from the ramp there,” said Gordon.

To play a move higher in Nvidia, Gordon is buying an October 170 call, paying $14.23. The stock must be above $184 by expiration to be profitable. If the stock increases beyond the $14.23 paid prior to expiration, the trade can be closed for a profit.

“We have some intrinsic value there, which I like to do ahead of a breakout. Buying an option, paying a little bit more with this intrinsic value, I think gives you a little bit more time,” he said.

Nvidia last traded above $184 in May. It would need to rally more than 2% to reach that level.

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