Nvidia's massive run reminds me of the tech bubble

Nvidia has been one of the best-performing stocks in recent years, soaring triple digits in the last 12 months alone.

However, a breather is long overdue.

Consider these astronomical gains as the company is set to report quarterly earnings next week. After an 850 percent rally from its February 2016 lows and a 1,150 percent in the last three years, long-term investors may want to consider taking some small profits in the stock.

Reminiscent of the dot-com bubble?

The stock's rally has been so strong over such a short period of time that it is now trading at a premium of more than 250 percent to its 200-day moving average; this is extreme, and reminiscent of what we saw for several tech stocks near the top of the tech bubble. Remember, Apple had a near-identical premium at the market top in 2000.

Indeed, it is difficult to time the market. Still, there is a difference between attempting to "time the market" and "managing your investments in a responsible way."

Positioning your portfolio

We can think of Nvidia's rise in another way. If you bought Nvidia two years ago, you can sell just 11 percent of your investment and get back 100 percent of what you put into the stock, but you'll still be able to take advantage of almost 90 percent of any further upside movement!

Investors do not have to sell all at once, particularly when they have fabulous gains.

They don't have to try to wring every last penny of profit out of the investment; peeling off small amounts after moves like these is simply a prudent way to manage one's investments properly ... and feel a lot better when the stock sees an inevitable correction.

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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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