TRADING GAME PLAN REVEALED - 08/27/2025

All eyes are on the market's undisputed heavyweight champion, NVIDIA, as it prepares to release earnings after the bell. In this morning's TRADING GAME PLAN REVEALED show, Gareth Soloway, Chief Market Strategist at Verified Investing, broke down the monumental expectations for the chipmaker and the technical pressure cooker building in the S&P 500. Today's deep dive will expand on these critical themes, exploring the universal market psychology behind key chart patterns and the disciplined mindset required to trade in such a high-stakes environment.

NVIDIA Earnings: The $4.5 Trillion Main Event

The significance of today's earnings report from NVIDIA cannot be overstated. With a market capitalization approaching $4.5 trillion USD, the company's influence extends far beyond the tech sector. As Gareth highlighted, this valuation is a staggering figure. "To put that in perspective, the entire Russell 2000 only has a market cap of around $3 trillion. So NVIDIA by itself is $1.5 trillion bigger than... the Russell 2000."

This colossal size means NVIDIA's post-earnings reaction will send shockwaves through the entire market. The expectations are sky-high. Analysts are looking for earnings of $0.98 per share on revenue of $45.91 billion USD. However, the real benchmark is the "whisper number"—the unofficial but widely acknowledged target that traders are pricing in—which stands at $1.06 per share.

The stock's recent price action, a rally of about $13 USD from last week's low, signals that investors are already betting on a spectacular report. This creates a challenging setup for the company.

"Investors are buying it up expecting them to have rockstar numbers, all right? Meaning that they probably to continue up have to beat the whisper number even at $1.06 per share."

A mere beat of the analyst consensus won't be enough. To sustain its upward momentum, NVIDIA will likely need to surpass the whisper number and, crucially, provide stellar forward guidance. As Gareth explained, "If they guide in line, the stock will sell off. If they miss guidance, obviously, it will sell off quite a bit." This report, combined with the PCE inflation data on Friday, sets the stage for a potentially explosive move in the broader market.

The S&P 500's Pressure Cooker

While NVIDIA holds the spotlight, the S&P 500 is developing a technical pattern that suggests a major move is imminent, regardless of the direction. The daily chart shows price being squeezed between two powerful trend lines: a long-term support line extending from the October 2023 lows and a more recent descending resistance line.

This type of consolidation is known as a wedge pattern, and it signals a buildup of energy. Gareth described the dynamic perfectly: "When wedge patterns squeeze price, it's like a pressure cooker. And ultimately what that means is whichever way it breaks, you're likely to get a subsequent large move in the market."

The catalysts for this breakout or breakdown are perfectly timed. The combination of NVIDIA's earnings and Friday's inflation data provides the necessary fuel to resolve this pattern. A breakout could see a powerful push towards the 6,700 level, while a breakdown could trigger a rapid decline toward 6,000.

The risk of a "double whammy" scenario is very real. Imagine a disappointing report from NVIDIA on Wednesday, leading to a sell-off on Thursday, followed by a hot inflation number on Friday. Such a sequence could easily provide the negative momentum needed to break support and initiate a significant market correction.

The Psychology of a Retrace: A Universal Market Behavior

One of the most powerful technical concepts Gareth discussed is the tendency for an asset to "retrace to the scene of the crime" after breaking a key trend line. This pattern is not unique to any single asset; it is a universal representation of market psychology.

NVIDIA's chart provides a textbook example. After finally breaking below the key uptrend line that had supported it since the April lows, the stock has rallied back up to test that same line from underneath. This behavior is rooted in human emotion.

"Charts are representations of human behavior. Uh it's buyers and sellers. It's greed and fear... when you get a breakdown, there's a certain amount of buyers that are saying, 'Oh, NVIDIA is on sale. Let me buy it and buy the dip because that has been what's been working all the way from the lows.'"

This "buy the dip" mentality creates the bounce, but the broken trend line now acts as resistance, where sellers who missed their chance to exit and new short-sellers are waiting. We see this exact pattern across different markets, from the 10-year Treasury yield to Bitcoin. It's a recurring theme because it's driven by the predictable emotional responses of market participants. For NVIDIA, this retrace points to a significant resistance zone around the $190 USD level, a key area to watch following the earnings release.

Earnings Movers and the Rubber Band Effect

Beyond NVIDIA, other companies are making dramatic moves on earnings, providing excellent case studies in trading psychology. MongoDB (MDB) surged an incredible 30% today, a move driven by optimism around AI and data centers. While such a powerful rally might intimidate many, for a technical trader, it presents a potential opportunity. Gareth identified a major resistance level for MDB around $299-$300 USD, a price zone that has repeatedly rejected the stock since September 2024.

The reason such an extended move is attractive for a counter-trend trade is explained by what Gareth calls the "rubber band effect."

"I liken it to a rubber band, right? You stretch your rubber band... At some point, either it snaps or you release it and what does it do? It snaps back hard."

Extreme price moves are often fueled by FOMO (Fear Of Missing Out), where emotion overtakes rational analysis. This stretches the price far from its equilibrium, like a rubber band. The more stretched it becomes, the more violent the eventual snapback. This is why a 30% move in MDB is more interesting than the modest pop in a stock like Okta (OKTA). The potential reward from the snapback is significantly greater. This principle requires patience and precise technical levels, but it's a powerful way to capitalize on market extremes.

The same psychological principles apply to stocks moving down. Kohl's (KSS), for example, saw a nice pop on its earnings. However, it's running into resistance levels like $19.77 USD, where countless "bag holders"—investors who bought during the previous meme-stock pump—are now praying to get back to their break-even price so they can sell. This trapped supply creates formidable resistance that technical traders can use to their advantage.

The Technician's Mindset: Probability, Patience, and Humility

Throughout the session, Gareth shared invaluable lessons on the mindset that separates consistently profitable traders from the rest. It's not about being right 100% of the time; it's about understanding probabilities, managing risk, and removing ego from the equation.

He used the example of a topping tail candlestick pattern on the Palladium chart to illustrate how context matters. A reversal signal is far more potent and has a higher probability of success when it appears at a 52-week or all-time high than when it forms in the middle of a trading range.

This probabilistic approach directly influences trade management. When shorting GDX, Gareth didn't go all-in at the first sign of resistance. He initiated a starter position with a plan to add to it at higher levels if the trade moved against him.

"I always found that being defensive is actually better for your bottom line in terms of profits."

This defensive, calculated approach is born from experience. Trading is a journey of continuous learning, often through painful losses. As Gareth candidly shared: "Guts doesn't matter. And I've learned this the hard way, guys... early in my career, I was losing all the time. So don't feel bad if you're in that position... That's part of the learning curve." The key is to educate yourself to shorten that curve and build a logical, non-emotional, probability-based process.

A Look Across the Markets

Bitcoin (BTC): The largest cryptocurrency is in a precarious position. After breaking its key trend line, it executed a classic retrace to the scene of the crime and was rejected. The breakdown is not yet confirmed, which would require a close below 109,300. If that level gives way, the path towards the major psychological and technical support at $100,000 USD opens up.

Gold (XAU/USD): The precious metal presents a fascinating dichotomy. Short-term, the chart action remains skeptical, with key resistance looming near $3,500 USD. However, the long-term fundamental picture is incredibly bullish. Gareth pointed to the unwavering playbook of global governments and central banks.

"Inflation is high... and they're already talking about cutting rates... they go back to what worked in the past even though inflation is going to stifle the consumer and all of us, but that's what they know how to do."

This cycle of stimulus and debt accumulation, even during economic expansions, creates an undeniable long-term tailwind for a hard asset like gold.

Conclusion: Navigating the Coming Volatility

The market stands at a critical juncture. The immense expectations for NVIDIA's earnings, coupled with the technical tension in the S&P 500, have created a recipe for significant volatility. Whether the market breaks higher or suffers a sharp correction will likely be decided in the next 48-72 hours.

By understanding the key technical levels, the psychological forces at play like the "retrace to the scene of the crime" and the "rubber band effect," and by adopting a disciplined, probability-based mindset, traders can navigate this environment with clarity. The roadmap has been laid out; now, it's a matter of executing the plan with patience and precision.