Hi everyone! I’m here to give another update on everybody’s favourite semiconductor stock - Nvidia!
To make my charts simpler and less cluttered, I have re-charted NVDA from scratch! It is very different from what I had envisioned previously.
Here’s a look at Nvidia’s daily chart:
Based on the daily chart, we can see that the stock is trading in a large broadening wedge pattern. Based on what I can see from the bearish divergences (red lines), it suggests that a big leg down could be coming on NVDA. We once again have higher highs based on price action but higher lows based on the 14-day RSI.
With yesterday’s closing candle showing a curl of the RSI, I think we have created a third lower high on the RSI while making a third higher high in the stock price. This is indicative of a leg down, and I foresee that we will make a leg down, firstly to touch the 9DEMA (9-daily EMA). Following which, we will probably bounce and then continue lower to the pivotal 214.74 level which is a Fibonacci extension level based on the price action since Nvidia IPO’ed. These levels are usually strong consolidation/rejection/support/resistance levels that everyone should be paying attention to! Subsequently, I see us breaking down and heading back towards the 173.83 level and touching the lower trendline of the broadening wedge.
Here’s a look at the weekly chart of NVDA (as of 24/2/23):
On the weekly chart, there appears to be a massive bearish divergence forming on a weekly timeframe. This doesn't bode well for the stock at all - the higher the timeframe, the stronger the price action once the divergence plays itself out (i.e. the stock price moves as it should in tandem with the indicators). I do think that a massive down leg is in place - the question is when, and how far, we go.
Here’s a look at the hourly chart as well:
We tested the 230.25 (start of the ER gap) during trading hours. However, we were unable to turn that level into resistance even though we breached it several times. Eventually, the stock price consolidated and then subsequently pushed higher. It ultimately closed between the downside gap created in pre-market trading yesterday and the ER gap. That being said, I do see us gapping below 230 - it was pretty apparent that the options sellers expected 230 to be a “put wall” for the day.
Lastly, a note about ER - yes, NVDA posted a beat. However, it is still overpriced relative to where it should be trading. It is trading at a P/E ratio that is indicative of it being a bubble (100+). Much of the uptrend for the past few weeks can be attributed to the AI craze, as we saw in stocks like BIDU, BABA. Once the hype died down, these stocks continued to respect their technicals - if you look at both stocks, the AI craze was sold off. Thus, bulls and investors should be cautious about starting new positions or adding to the stock at these levels. In short, buy the rumour and sell the news is the best way to approach this mania!
As this post is rather lengthy, I will summarise my outlook into this paragraph:
The uptrend is done for now. I am expecting us to head lower and gap fill. With sufficient bearish momentum, we could also head down to test the broadening wedge lower trendline. My final target for this downtrend is the 160-170 area, where there is a Fibonacci extension level that the stock could bounce off of.
Good luck everyone! If you enjoyed this post, then leave a like and/or a comment on my post and follow me for more of such posts!
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