Log Chart Paints Bleak Picture for NVDA
Updated
Primary Chart: Daily Chart on Log Scale with Down Trendlines, VWAPs, and Key Price and Fibonacci Levels
Some may be feeling a bit giddy over the fact that NVDA has rallied 28% off the lows. But look at those other bear rallies since the all-time highs shown on the Primary Chart. How do we know this time will be different? Expecting it to be different before a dramatic shift in the macro environment, or before a serious change in trend structure, is like hoping a lottery ticket will somehow beat the astronomical odds against it.
This post is not asserting that traders can't make money on a bear rally. Countertrend trades, though lower probability trades that remain very tricky, can be a profitable part of a traders approach. For traders willing to see both the bearish and bullish side of markets this year, some of the bear rallies could have been exceedingly profitable even if only a portion of those rallies was caught by the trade.
A logarithmic chart of this former stock market leader
NVDA reveals an even bleaker picture than the linear chart. A linear chart shows that NVDA is contending with some limited degree of success with a shorter-term down TL from March 29, 2022 through the mid-August 2022 highs.That has some validity and can be watched as well going forward. But given the sheer magnitude of the decline this year, it's worth paying heeding the log version (shown on the Primary Chart) as well. The log version shows the shorter down TL being some distance above where price is currently trading, meaning that NVDA has a fair amount more work to even start to *begin* to change its trend structure.
For comparison, here is the linear chart with the shorter of the two major down TLs shown:
Supplementary Chart A: Down TL from March 29, 2022
Sure, NVDA is rallying nicely off the YTD lows from mid-October 2022. And that rally should continue to be respected until it's confirmed to be complete. A good way to gauge the rally off the lows is to use an upward trendline—here a parallel channel is used, and the lower boundary of the channel is the upward trendline off the lows. Consider the following "zoomed-in" version of the chart using an intraday 130m price bar:
Supplementary Chart B: Parallel Channel from October 2022 Low
For now, price is well contained within that channel. Shorting does not make sense until good confirmation arises that this bear rally is finished. The VWAP anchored to YTD lows (orange) also may work as a guide for the short-term bear rally. It is prudent not to fight the rally until it's weakened or has reached a major resistance level and shown signs of weakening momentum or negative divergences.
SquishTrade will be continuing to monitor both NVDA and AMD for potential shorts should this rally gather a bit more steam. A key tell is that semiconductors have decisively undercut YTD lows in June, which creates a bearish pattern generally speaking.
What are some logical price targets for this rally? Before discussing targets, a bit of a disclaimer. Countertrend targets can be a little silly to discuss—a countertrend rally can fail at any time, so picking a price target is a bit like tossing a dart with one's eyes closed. But given the parallel channel and VWAP remain supportive of the rally so far, NVDA could continue to climb until it gets squished by the FOMC presser, CPI report, or disappointing earnings.
NVDA closed at $135 today, November 1. SquishTrade thinks NVDA has a reasonable probability of reaching $140.55 (the blue line on the Primary Chart that coincides with a major swing low). Only if $140.55 is exceeded, the next price target can come into play—which is $144.36, a key Fibonacci level. After that is the $145-150 gap fill area which will also coincide with the down TL from March 2022 (on a log chart) in the next week or so.
Just because these targets make sense does not mean that they should be traded, which depends on a person's risk tolerance, time frame, ability to use stops and manage risk as well as understanding of volatility.
________________________________________
Author's Comment: Thank you for reviewing this post and considering its charts and analysis. The author welcomes comments, discussion and debate (respectfully presented) in the comment section. Shared charts are especially helpful to support any opposing or alternative view. This article is intended to present an unbiased, technical view of the security or tradable risk asset discussed.
Please note further that this technical-analysis viewpoint is short-term in nature. This is not a trade recommendation but a technical-analysis overview and commentary with levels to watch for the near term. This technical-analysis viewpoint could change at a moment's notice should price move beyond a level of invalidation. Further, proper risk-management techniques are vital to trading success. And countertrend or mean-reversion trading, e.g., trading a rally in a bear market, is lower probability and is tricky and challenging even for the most experienced traders.
DISCLAIMER: This post contains commentary published solely for educational and informational purposes. This post's content (and any content available through links in this post) and its views do not constitute financial advice or an investment or trading recommendation, and they do not account for readers' personal financial circumstances, or their investing or trading objectives, time frame, and risk tolerance. Readers should perform their own due diligence, and consult a qualified financial adviser or other investment / financial professional before entering any trade, investment or other transaction.
Some may be feeling a bit giddy over the fact that NVDA has rallied 28% off the lows. But look at those other bear rallies since the all-time highs shown on the Primary Chart. How do we know this time will be different? Expecting it to be different before a dramatic shift in the macro environment, or before a serious change in trend structure, is like hoping a lottery ticket will somehow beat the astronomical odds against it.
This post is not asserting that traders can't make money on a bear rally. Countertrend trades, though lower probability trades that remain very tricky, can be a profitable part of a traders approach. For traders willing to see both the bearish and bullish side of markets this year, some of the bear rallies could have been exceedingly profitable even if only a portion of those rallies was caught by the trade.
A logarithmic chart of this former stock market leader
NVDA reveals an even bleaker picture than the linear chart. A linear chart shows that NVDA is contending with some limited degree of success with a shorter-term down TL from March 29, 2022 through the mid-August 2022 highs.That has some validity and can be watched as well going forward. But given the sheer magnitude of the decline this year, it's worth paying heeding the log version (shown on the Primary Chart) as well. The log version shows the shorter down TL being some distance above where price is currently trading, meaning that NVDA has a fair amount more work to even start to *begin* to change its trend structure.For comparison, here is the linear chart with the shorter of the two major down TLs shown:
Supplementary Chart A: Down TL from March 29, 2022
Sure, NVDA is rallying nicely off the YTD lows from mid-October 2022. And that rally should continue to be respected until it's confirmed to be complete. A good way to gauge the rally off the lows is to use an upward trendline—here a parallel channel is used, and the lower boundary of the channel is the upward trendline off the lows. Consider the following "zoomed-in" version of the chart using an intraday 130m price bar:
Supplementary Chart B: Parallel Channel from October 2022 Low
For now, price is well contained within that channel. Shorting does not make sense until good confirmation arises that this bear rally is finished. The VWAP anchored to YTD lows (orange) also may work as a guide for the short-term bear rally. It is prudent not to fight the rally until it's weakened or has reached a major resistance level and shown signs of weakening momentum or negative divergences.
SquishTrade will be continuing to monitor both NVDA and AMD for potential shorts should this rally gather a bit more steam. A key tell is that semiconductors have decisively undercut YTD lows in June, which creates a bearish pattern generally speaking.
What are some logical price targets for this rally? Before discussing targets, a bit of a disclaimer. Countertrend targets can be a little silly to discuss—a countertrend rally can fail at any time, so picking a price target is a bit like tossing a dart with one's eyes closed. But given the parallel channel and VWAP remain supportive of the rally so far, NVDA could continue to climb until it gets squished by the FOMC presser, CPI report, or disappointing earnings.
NVDA closed at $135 today, November 1. SquishTrade thinks NVDA has a reasonable probability of reaching $140.55 (the blue line on the Primary Chart that coincides with a major swing low). Only if $140.55 is exceeded, the next price target can come into play—which is $144.36, a key Fibonacci level. After that is the $145-150 gap fill area which will also coincide with the down TL from March 2022 (on a log chart) in the next week or so.
Just because these targets make sense does not mean that they should be traded, which depends on a person's risk tolerance, time frame, ability to use stops and manage risk as well as understanding of volatility.
________________________________________
Author's Comment: Thank you for reviewing this post and considering its charts and analysis. The author welcomes comments, discussion and debate (respectfully presented) in the comment section. Shared charts are especially helpful to support any opposing or alternative view. This article is intended to present an unbiased, technical view of the security or tradable risk asset discussed.
Please note further that this technical-analysis viewpoint is short-term in nature. This is not a trade recommendation but a technical-analysis overview and commentary with levels to watch for the near term. This technical-analysis viewpoint could change at a moment's notice should price move beyond a level of invalidation. Further, proper risk-management techniques are vital to trading success. And countertrend or mean-reversion trading, e.g., trading a rally in a bear market, is lower probability and is tricky and challenging even for the most experienced traders.
DISCLAIMER: This post contains commentary published solely for educational and informational purposes. This post's content (and any content available through links in this post) and its views do not constitute financial advice or an investment or trading recommendation, and they do not account for readers' personal financial circumstances, or their investing or trading objectives, time frame, and risk tolerance. Readers should perform their own due diligence, and consult a qualified financial adviser or other investment / financial professional before entering any trade, investment or other transaction.
Note
NVDA reached the first target for the countertrend rally at $140. It pushed up to $142.10 today during one of the market's whipsaw moves.The original post stated as follows regarding NVDA's countertrend rally:
What are some logical price targets for this rally? Before discussing targets, a bit of a disclaimer. Countertrend targets can be a little silly to discuss—a countertrend rally can fail at any time, so picking a price target is a bit like tossing a dart with one's eyes closed. But given the parallel channel and VWAP remain supportive of the rally so far, NVDA could continue to climb until it gets squished by the FOMC presser, CPI report, or disappointing earnings .
NVDA closed at $135 today, November 1. SquishTrade thinks NVDA has a reasonable probability of reaching $140.55 (the blue line on the Primary Chart that coincides with a major swing low). Only if $140.55 is exceeded, the next price target can come into play—which is $144.36, a key Fibonacci level. After that is the $145-150 gap fill. "
NVDA reached the first PT at $140.55. It came within striking distance of the second target at $144.36.
Now it has broken below its uptrend channel. If this is not reclaimed immediately, then the downward pressure may have likely resumed as of today's close.
Note
NVDA continues to push higher into the gap fill zone of resistance at $145-$150. Above this level lies another resistance level at $154 and then even more resistance levels at $165-$170. Watching the VWAP from the YTD low on October 13, and the uptrend channel that has been reclaimed after being violated in a false breakout to the downside.Note
Earnings present a binary event that can confound bulls and bears alike. Earnings for NVDA reported on Wednesday, 11/16/22. As ST frequently reiterates, respect bear rallies until they're exhausted and confirming that they're done—unless you know something the market doesn't know.The first chart is a log chart, and the second is a linear one:
Note
Several countertrend targets were discussed on Nov. 1 in the original post, the relevant excerpts of which are copied below:"For now, price is well contained within that channel. Shorting does not make sense until good confirmation arises that this bear rally is finished. The VWAP anchored to YTD lows (orange) also may work as a guide for the short-term bear rally. It is prudent not to fight the rally until it has weakened or has reached a major resistance level and shown signs of weakening momentum or negative divergences. . . .
What are some logical price targets for this rally? Before discussing targets, a bit of a disclaimer. Countertrend targets can be a little silly to discuss—a countertrend rally can fail at any time . . . .
NVDA closed at $135 today, November 1. SquishTrade thinks NVDA has a reasonable probability of reaching $140.55 (the blue line on the Primary Chart that coincides with a major swing low).
Only if $140.55 is exceeded, the next price target can come into play—which is $144.36, a key Fibonacci level. After that is the $145-150 gap fill area which will also coincide with the down TL from March 2022 (on a log chart) in the next week or so.
Just because these targets make sense does not mean that they should be traded, which depends on a person's risk tolerance, time frame, ability to use stops and manage risk as well as understanding of volatility."
Later in a Nov. 8 update, ST discussed another pT, the $154 resistance level that might be reached as well.
All these targets have been successfully reached. NVDA has climbed to nearly $169.98 yesterday.
The only aspect of the original post that remains unfulfilled is the implied forecast that the downtrend will resume. (This implication derives from ST's discussion of the move off YTD lows as a "bear rally" and identification of resistance levels and countertrend targets.)
ST will continue to monitor NVDA and AMD for a reversal to resume the downtrend. A key tell is that semiconductors decisively undercut prior YTD lows in June, which creates a bearish pattern generally speaking. To reiterate a point made above:
"Some may be feeling a bit giddy over the fact that NVDA has rallied 28% off the lows. But look at those other bear rallies since the all-time highs shown on the Primary Chart. How do we know this time will be different? Expecting it to be different before a dramatic shift in the macro environment, or before a serious change in trend structure, is like hoping a lottery ticket will somehow beat the astronomical odds against it. . . . "
SquishTrade
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