Goldman Sachs loves this stock, but Wall Street hates it

Goldman Sachs is in a tug-of-war battle with the rest of Wall Street when it comes to one of this year's best-performing stocks.

The firm initiated buy coverage on chip-maker Nvidia this week, citing potential for strong growth. The stock is up more than 40 percent in 2016, making it the best-performing stock in the S&P 500 technology sector. Despite the outperformance, it's still among the companies in the large-cap index with the highest percent of short interest.

So, who is right about Nvidia: Goldman Sachs or everyone else?

"When you have Goldman Sachs on one side of the seesaw and the rest of Wall Street on the other side, it's pretty fair," Dennis Davitt of Harvest Volatility Advisors told CNBC's "Trading Nation" on Thursday. "The thing that really jumps out to me is the short interest," he added.

Nvidia is within the top 5 percent of companies in the S&P 500 with the highest short interest, which leads Davitt to get short the stock via put options. "I think the stock will more than likely roll over, and that's what the options market is telling us," he added. He recommended buying the June 43-strike puts, which places the stock roughly 6 percent lower than its current price of around $46.

"The short interest itself can actually provide fuel for further upside," refuted Rich Ross of Evercore ISI. "If you look at the 50-week moving average, it's provided support along the way up until this explosive move," he said Thursday.

Ross explained that the stock is now trading 50 percent above its short-term weekly moving average, which he compared to a move up to 3,000 on the S&P 500.

"I don't think this is the most compelling entry point, but if you're thinking about shorting this stock I'd say hold on to your money," he added.

Shares of Nvidia were down nearly 2 percent on Friday.


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Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's “Closing Bell (M-F, 3PM-5PM ET).   In addition, he contributes to CNBCand CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

Follow Michael Santoli on Twitter @michaelsantoli

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