Nvidia NVDA is an interesting stock in that it’s up almost 185% over 12 months as of July 17 -- but has rallied and sold off over the past two months. So, what now?
Let’s see what the stock’s chart as of July 17 might show us:
The first thing you might notice is that NVDA hit a “basing period” from March into May, as denoted by the two pink horizontal lines above.
The stock then broke out around May 21, although a sell-off followed beginning around June 21.
This sell-off has been supported by the 38.2% Fibonacci retracement level of the earlier breakout, as denoted by the thick purple line at right in the above chart. It also looks to the stock's 50-day Simple Moving Average (SMA), as denoted by the thin blue line above.
Meanwhile, Nvidia’s Relative Strength Index (RSI) has moved into the neutral zone -- not even close to being in technically overbought or oversold territory – as shown in the blue box above.
Lastly, Nvidia’s daily Moving Average Convergence/Divergence chart (or “MACD”) is coming off of extended levels in June, with the histogram of the stock’s nine-day Exponential Moving Average (EMA) in negative territory for about a month now, as denoted by the green box above.
Separately, the MACD’s 12-day EMA remains below the 26-day EMA, as also seen in the green box above. This is historically a bearish pattern.
All in, NVDA might be trying to develop a new base of consolidation at recent levels before deciding on whether it's time to break out above the $141.40 level or head back down to its 200-day Simple Moving Average (the thin red line in the chart above).
But a word of caution. The stock might also be developing a so-called “double top” pattern, which could be seen as a pattern of bearish reversal.
Full disclosure: The author of this article was long Nvidia stock and Nvidia calls as of the time of this writing.
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