To The Moon

Nvidia in a nutshell

Fundamentally, Nvidia is early in the AI trend and has a huge runway ahead. I do not deny that and am long term bullish on Nvidia still. However, it is now at the stage where it will face tough comps moving forward coming off a couple of exhilarating quarters with stupendous earnings. Emotions have to be kept in check with facts and technicals are a good way of aligning with the facts. They have a way of showing up the facts before the fundamentals actually catch up.

Technically, Nvidia is in the fifth wave of a third wave of an impulse pattern stretching from the Oct 2022 low. Technically, this third wave started from the October 2022 low. The preceding first and second waves stretched all the way back to the 2016 lows. So it is in the last throes of its third wave before the impending fourth wave retreat. This fourth wave retreat will be a multi-month event on the scale of the preceding waves.

So as we can see from the charts, the fifth wave of this big third wave has already extended past the first accepted extension in the world of Elliot wave theory which is the same extension as the size of the first wave and it is now stalling at the 161.8 % levels of the extension of the fourth wave which also coincides with the 200% levels of the ongoing big third wave.

However, fifth waves are unpredictable and as we know can extend and the next accepted level of extension will be at the 61.8% extension of the third wave of this big third wave which will take us to 845 thereabouts. As such, this AI exuberance can take us to that level and hence 850 is not an unthinkable event. It is a possibility and recognised level according to Elliot wave calculations. Whether it will reach that level is another question altogether. I use Elliot wave as well as Gann theory to risk manage and being conservative in general, I do not like the unpredictability fifth waves carry.

Gann calculations indicate a strong confluence at these levels coinciding with the 45 degrees angle from the 2018 top. There are also three long term horizontal time cycles clustering at these levels. Price is showing volatility at these levels and speaks for itself.

So on a personal level, I am no more vested in Nvidia, as well as being ultra defensive, conserving capital with a high allocation to cash and hedging 20% of my portfolio (only carrying AI names still in their uptrends) at current levels to ride out this uptrend while keeping my risk levels low. 

Disclaimer: Please kindly do your own due diligence as this is a sharing article and in no means financial advise. I am just sharing my opinions and thoughts.

Thanks for reading my commentary. Hope it helps!

Stay safe! 😊

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