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Hi Sam,
Could you just elaborate on this a bit more?
I’m not understanding the relationship between this being the first fundamentals related impact and why that means it’s going to be short-term in nature.
So the stock has dropped from a high of $152 down to a low of $86 right? How much of that sell-off is related directly to Nvidia’s earnings, valuation and fundamentals? I’d say a very very small percentage.
Most of that is due to the NASDAQ-100 (QQQ) dropping 25% from peak to trough — partially owing to the tariff crisis and partially due to the market retracing massive gains in 2024.
When stocks fell between 50-80% during the 2022 bear market or 60% during the 2008 financial crisis, the overwhelming majority had strong earnings and fundamentals. Everything goes down together in a sell-off.
Most companies are simply victims of correlation. Nvidia is one such company. This is the first real piece of actual news having an impact on Nvidia’s actual earnings and yet the stock has already taken a $40 hit to its stock price before yesterday’s news.
The point is the sell-off we’ve already seen in the prices in a lot of negative information ahead of time. Hence why it isn’t down all that much relative to the actual news item.
For example, Meta dropped 80% during the 2022 bear market and fully recovered every dime and went on to make substantial new highs in the post bear market recovery. A lot of other stocks experienced the same.
We’ll see the same with Nvidia once this correction ends and we rallying back toward the highs.
The takeaway is that the impact is unlikely to have lasting effect because once the market starts rallying over several weeks, Nvidia is going to rally with it and negative news will be in the rear view mirror. That’s the general idea.
NVDA hit oversold on hourly 29.91 RSI
This sort of analysis is why I subscribe. Tech focused and level-headed. I was wondering about negative news in an already negative market environment. Thanks for addressing Nvidia, the elephant in the room today.
Hi Sam,
How do you think NVDA will trade in relationship to QQQ in regards to beta if the market were to take a third leg lower? You mention QQQ won’t have such a drastic move in an event of a thid leg lower so does that mean NVDA won’t move as much as it has in recent weeks? What areas of support do you think NVDA will have in the event of a third leg lower? Looks like the 50% fib retracement level is $100.50 and 61.8% fib retracement level is $97.25. Do you think those are relevant here?
Thanks!
Yeah so I think we could see Nvidia more easily pull-back to $100 and under now that it already has. Nvidia had enormous support at the $100 level and the tariff crisis helped clear that support.
So I think the stock is more easily able to trade under $100 than it did before last week. With that being said, I think what we’ll see happen beta wise is that Nvidia is likely to become oversold before the market will. That means we’ll probably see Nvidia have days where it outperforms on the downside in a third leg scenario.
The QQQ might drop 3% in a day and we could see Nvidia down 1% or flat. We’ve seen that exact type of thing in the past.
Right now, Nvidia is trading at a 35.8 RSI while the QQQ is at a 45.2 RSI indicating Nvidia is likely to reach oversold before the QQQ does. Once it reaches oversold, it will be due for another rebound and that rebound will be substantial $10+.
It’s incredible indeed that the stock hit $100.67 today… I couldn’t believe it, and then there was a small rebound at the end of the session, ending at $104.49. This session was strange… It seems to be over to me, and a $10 to $15 rebound is in sight. The possibility of retesting the $94-$100 zone before rebounding to $120 seems to be out of the question. What do you think?
Hey Sam, I just wanted to post this again from yesterday: you said that at some point the market would just rally and not care about the same issue anymore. That it would rally and the sentiment would change and it would then be attributed to something by the media.
Do you think that that would happen even with Trump doing what he‘s doing? I mean would the market just ignore him even if he put massive Tariffs back on or some other nonsense?
I am asking since the market has been so news-driven for a while now and the probable scenario seems to change every few days only to then be upended again by yet more news.
It really just depends on what Trump is doing. There is some form of negative Trump related news happening every day and as you can see the market has started to largely ignore that. Since last Monday (capitulation day), the market has been trending higher.
We can see an easy shift to a multi-week rally where the market largely just ignores everything coming out of the administration. But if Trump brings back reciprocal tariffs en masse, then of course it will have an impact.
But the point is the market has no problem adjusting to a new normal and the entire stock market is driven by supply/demand in the end. There is only a finite supply of shares to be sold and an ever growing demand. It’s why the stock market is always moving higher over the long-term.
That dynamic isn’t changing anytime soon. It’s why corrections and bear markets are relatively short lived while rallies last years and decades.
Also, Trump has kind of already shown his hand a little and the market isn’t going to fall for it anymore.
Notice how right now, at this very moment, we don’t have a real dramatic impact from tariffs. As of right now, there is no 50% drop-off in company earnings. Apple’s iPhone’s aren’t rising to $3,600 in the U.S.
There isn’t ‘a structural repricing of risk’ due to a madman trying to bring down the world. Trump had his chance to tank the global economy and didn’t follow through. That’s what the 90-day postponement was about.
The market is going to remember that next time he claims sweeping tariffs. And even if they go into effect, you can bet it won’t be for long.
The key thing we learned last week is there is a pressure point that can be exerted on the Trump administration. Either the administration IS in fact susceptible to pressure or it isn’t as crazy as people think. One or the other is true.
So yeah. I think the market will get over it fairly quickly. The market is good at sniffing out bullshit, so to speak.
Thank you Sam! That does make sense to me actually.
I’m thinking of scrapping the NASDAQ spreads and reallocating to something better. There’s still a bit of value there and that’s better than 0.
Hey Sam, I know that we might not come out of the spread QQQ May unscratched. With the market cloudy for a third leg right now, what do you think about that now ?
I am thinking of exiting. It’s not the end of the world but every day that goes by requires a higher underlying price. Selling during a pullback doesn’t feel great but anything is better than 0.
IMO, it’s increasingly unlikely those will be worth anything. I’d peg as near 0 chance. That’s just my take. Sam probably has better insight.
I think he said we would wait to see if they recoup any value on a bounce, as they are already having nominal value. Yesterday was an “opportunity cost” discussion as well. I think they were down 98% or something the last I checked. If we run to $470+ in the next week or two, would they be worth more? At least sell on a up day, no?
The value at $470 in a week, or 2 weeks will be lower than last week.
Getting to the 500 level before May 10th is our only way to level our stake.
I am selling and reallocating
Well, I guess one good news is that the puts from yesterday morining are already quite green. This market…
3rd leg confirmed?
Hello Sam,
The 10th April you explained :
“Now obviously it would be a substantially stronger pattern if Nvidia were able to have rallied to $122 first. A rally up to $122 would form a clear-cut inverse head & shoulders. We’d have a neckline at $122, a head at $86 and shoulders at $103. A set-up like that would be ultra bullish and significant a breakout to $158. That would be the upside target on a breakout move of an IHS of that magnitude (measured from neck $122 to head at $86).
It’s still actually really early in the process and we could easily see the market make a second push higher here shortly, wich in turn could push Nvidia up to $122 before leading into a larger pull-back.
Regardless, Nvidia is set up to form a higher low here.”
So we saw the stock fall below $103 before rising to $122.
So, here are three hypotheses:
1) A close call at $96-$98: unlikely in your opinion?
2) A strong rebound to $120 by Friday?
3) A rebound to the $114 area by Friday before considering a move to $120 and then $130 once the news has been digested, like DeepSeek?
Sam ?
And the bounce at the end of the day basically puts NVDA right back at its open, and broadcom actually cut its loss in half there at the end….
it’s interesting that both QQQ and NVDA unfolded almost exactly as Sam’s charts suggest. I wonder if this means third leg is off, and this was merely a pull back?
NVDA hit oversold on the hourly.
What do you think about Tesla’s earnings next week, do we need to take any action?