Relative Weakness In NVDA Could Lead To A Great Entry Opportunity

 Over the past few trading sessions I’ve been noticing some relative weakness developing in NVDA when compared to the SPY, and it’s something that immediately caught my attention as a trader. Relative strength and relative weakness are two of the biggest things I focus on intraday because they can often give clues about where institutional money is flowing. In this case, NVDA has clearly been lagging behind the broader market.

If you look at the chart above, you’ll see NVDA displayed on the top with the SPY directly below it for comparison purposes. What really stands out to me are the areas marked A, B, C, and D. At each of those points the SPY continued pushing to higher highs while NVDA was doing the exact opposite by putting in lower highs. That divergence is a textbook example of relative weakness. When a leading stock begins failing to confirm the strength of the overall market, it’s often a warning sign that momentum is slowing down.

For active day traders, this setup actually presented a solid opportunity on the short side. While the market itself continued grinding higher, NVDA struggled to keep pace and repeatedly failed at resistance levels. Those failed pushes created opportunities to scalp short-term downside moves throughout the day. In many cases, weak stocks in a strong market can offer some of the cleanest short setups because they tend to drop quickly once buying pressure dries up.

That said, I’m not bearish on NVDA longer term. In fact, when I shift over and look at the Daily chart on the right side, I actually see a very healthy pullback developing. After such a powerful run over the past couple of months, a retracement like this is completely normal and, in my opinion, even constructive. The stock now appears to be approaching a rising trend line that could act as an area of support. If buyers step in near that level, it could set up for another leg higher.

Because of that, I’m already thinking ahead to next week and planning how I want to position myself. Rather than chasing shares outright, my strategy will likely be to sell out of the-money puts around the 205 strike price. I like this approach because it allows me to collect premium while potentially entering the stock at a lower price if the options get exercised.

Even if my timing is slightly off and NVDA continues drifting lower temporarily, I honestly wouldn’t mind owning shares down near the 205 area. That would give me a solid entry on a high quality stock while also allowing me to keep the premium collected from selling the puts. For now, I’m staying patient and letting the charts guide me. It should be interesting to see how this setup unfolds next week.