Nvidia is one of few stocks in the market I’m interested in being long right now, says trader

Nvidia is down more than 5 percent from its recent high, but the charts suggest the hot chip stock's rally is about to resume.

According to Todd Gordon, founder of TradingAnalysis.com, Nvidia is one of the few stocks in the market right now worth a buy. He pointed to two bullish technical indicators that lead him to think the stock is set for a breakout.

  • The first of these indicators is a "divergence" that Gordon sees between Nvidia and the Nasdaq 100-tracking ETF (QQQ), where Nvidia has recaptured those 2018 highs whereas the Nasdaq 100 has not.

  • After Nvidia sold off post-earnings, it has managed to come back and break through what Gordon believes is resistance, leading him to think that Nvidia could soon rally back to the $260 level.
  • Furthermore, Gordon pointed to the stock's implied volatility, or price of options. Since the company reported earnings, the price of buying puts and calls has decreased dramatically, making the stock even more attractive.

The trade: Gordon suggested buying the June 1 weekly 250/255 call spread for $1.65, or $165 per options contract.

Bottom line: Gordon expects Nvidia shares to rally as high as $255 by Friday, June 1 – or roughly 4 percent in about two weeks.

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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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