Is Nvidia Finally Topping Out?
Is Nvidia Finally Topping Out?
Nvidia, the chip manufacturer, has unquestionably been the standout stock of the year, driven by the increasing demand for its 'supercomputer' chips that are playing a key role in the AI revolution.
The company's shares have experienced a remarkable uptrend, surging by an impressive 227% year-to-date. However, we are starting to see some subtle signs that Nvidia’s share price might be nearing a turning point.
Before we break down why Nvidia’s powerful uptrend might be coming to an end, let’s take a look at the year-to-date view on the daily candle chart:
NVDA Daily Candle Chart YTD
We can see that Nvidia’s shares have been running relentlessly higher since the turn of the year with prices comfortably above the 50-day and 100-day simple moving averages.
Whilst calling the end of established trends like this tends to be foolish, we are seeing some signs that Nvidia’s share price may be due for a deeper retracement.
Let’s zoom in and take a closer look at Nvidia’s recent price action:
NVDA Daily Candle Chart Zoomed View
On this zoomed view we can see that during the last two weeks, Nvidia’s share price has struggled to break and hold above resistance at $480.85.
We’ve seen multiple dark cloud cover patterns print at resistance – this pattern is created when the market gaps higher at the open only to end the session back within the previous days range.
And this week, we have seen the shares attempt to hold above resistance only for the market to close lower during yesterday’s session.
It is also worth noting that whilst prices have continued to carve out a series of higher swing highs and higher swing lows, the Relative Strength Index (RSI) has been trending lower.
This negative divergence on the RSI, combined with the recurring failures at resistance indicate that selling pressure is starting to build and we could start to see some profit taking.
Risk management
Counter-trend trades pose the risk of the established trend continuing, so traders should always use prudent risk management.
For stop placement, traders could use the recent highs or a multiple of Nvidia’s average true range (ATR).
On the calendar, we have Nvidia’s appearance at the Citi Global Technology Conference today (7th September) and Nvidia’s appearance at the Bank of America Global AI Conference on 11th September. These events have the potential to increase the volatility of Nvidia’s share price.
It is also worth noting that Nvidia’s share price will be sensitive to global macro-economic data and events.
Disclaimer: This is for information and learning purposes only. The information provided does not constitute investment advice nor take into account the individual financial circumstances or objectives of any investor. Any information that may be provided relating to past performance is not a reliable indicator of future results or performance.
Nvidia, the chip manufacturer, has unquestionably been the standout stock of the year, driven by the increasing demand for its 'supercomputer' chips that are playing a key role in the AI revolution.
The company's shares have experienced a remarkable uptrend, surging by an impressive 227% year-to-date. However, we are starting to see some subtle signs that Nvidia’s share price might be nearing a turning point.
Before we break down why Nvidia’s powerful uptrend might be coming to an end, let’s take a look at the year-to-date view on the daily candle chart:
NVDA Daily Candle Chart YTD
We can see that Nvidia’s shares have been running relentlessly higher since the turn of the year with prices comfortably above the 50-day and 100-day simple moving averages.
Whilst calling the end of established trends like this tends to be foolish, we are seeing some signs that Nvidia’s share price may be due for a deeper retracement.
Let’s zoom in and take a closer look at Nvidia’s recent price action:
NVDA Daily Candle Chart Zoomed View
On this zoomed view we can see that during the last two weeks, Nvidia’s share price has struggled to break and hold above resistance at $480.85.
We’ve seen multiple dark cloud cover patterns print at resistance – this pattern is created when the market gaps higher at the open only to end the session back within the previous days range.
And this week, we have seen the shares attempt to hold above resistance only for the market to close lower during yesterday’s session.
It is also worth noting that whilst prices have continued to carve out a series of higher swing highs and higher swing lows, the Relative Strength Index (RSI) has been trending lower.
This negative divergence on the RSI, combined with the recurring failures at resistance indicate that selling pressure is starting to build and we could start to see some profit taking.
Risk management
Counter-trend trades pose the risk of the established trend continuing, so traders should always use prudent risk management.
For stop placement, traders could use the recent highs or a multiple of Nvidia’s average true range (ATR).
On the calendar, we have Nvidia’s appearance at the Citi Global Technology Conference today (7th September) and Nvidia’s appearance at the Bank of America Global AI Conference on 11th September. These events have the potential to increase the volatility of Nvidia’s share price.
It is also worth noting that Nvidia’s share price will be sensitive to global macro-economic data and events.
Disclaimer: This is for information and learning purposes only. The information provided does not constitute investment advice nor take into account the individual financial circumstances or objectives of any investor. Any information that may be provided relating to past performance is not a reliable indicator of future results or performance.
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