Hi everyone. Today I’ll be covering one of the most watched stocks in the world:
Nvidia Corporation (NASDAQ: NVDA)
NVDA is trading in an ascending channel with a consistent series of higher highs and higher lows. I have also drawn out an ascending broadening wedge pattern based on expanding highs and lows (i.e. larger range between swings).
The weekly chart above suggests that some bearish divergence is forming, as can be seen on both RSI and Stochastic RSI with the lower high and bearish crossover respectively.
On the daily chart, NVDA continues to base at this 117 area, forming an “M” shape in the process. While not yet at 0, Stochastic RSI is in the extreme oversold zone. I have indicated the risk-to-reward for the respective market participants (bulls and bears) at the respective zones.
Between current levels and the 101.52 level which marks the top of the bullish island gap, bulls are still in control, even if NVDA breaks below the ascending channel. I would only turn bearish and call a long-term top if we fail to hold the 96.02-101.52 area. A breakdown and rejection of 96.02-97.40 would also be a failed backtest of prior ATHs (97.40) that usually leads to a move lower in the longer term.
If NVDA continues to hold within the green box, then it should continue to drift higher even if it breaks down from the ascending channel. The long-term target I have for NVDA is the 2.618 Fib extension at 191.52, assuming a swing low of 39.23 and a swing high of 97.40.
The monthly and quarterly charts show NVDA breaking out of a bearish divergence resistance trendline (in purple). That could suggest more upside to come until indicators hit the 100,100 extreme overbought level. Even then, such levels do not necessarily lead to an immediate top.
I will be buying the dips on this name starting end of this month. However, I remain cautious on NVDA. Exiting the overbought zone could precede a drawdown similar to the one we saw in 2022.
Thus, I am initiating coverage on NVDA with a HOLD sentiment.
Sentiment: HOLD (New)
Summary (with Price Targets - NFA):
Trading in an ascending channel and/or an ascending broadening wedge
R/R favours bulls unless NVDA falls below 101.52 and starts filling the island gap, with a long-term target at the 2.618 Fib extension at 191.52
R/R favours bears once NVDA breaks below 96.02-97.40, with a long-term target at 75.18
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$NVIDIA Corp(NVDA)$ $Advanced Micro Devices(AMD)$ $SUPER MICRO COMPUTER INC(SMCI)$ $Intel(INTC)$ $ASML Holding NV(ASML)$
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