How the Mighty NVDA Has FallenPrimary Chart: Parallel Channel Containing NVDA's Bear Market Price Action Since Its All-Time High
ANALYSIS SUMMARY: Trading NVDA at the middle of its downtrend channel is tricky and uncertain, and should be avoided. Nevertheless, the overhead gap has a likelihood of being filled up to 150.00 USD. But the 8-day EMA will have to be recovered first. Ultimately, however, NVDA should see new lows—probably within a few weeks, and certainly with in a few months.
NVDA has fallen -61.7% from its all-time high. Some investors, with a 3-10 year view, may be interested in buying here for the long-term with the understanding that its GPU and chip business will continue to dominate and be a future tech leader. Others may wish be patient and allow the market to do its work of price discovery until it's complete.
For traders, NVDA does not present a good risk-reward setup in either direction. It's sitting right in the middle of a parallel channel that has contained price action throughout the downtrend since NVDA's all-time high in November 2022. Some of the reasons trading is extremely tricky for NVDA right now include:
Choppy price action in the indices, including SP:SPX (also traded as AMEX:SPY ) and NASDAQ:NDX (also traded as NASDAQ:QQQ );
On September 1, 2022, NVDA's price took out the July 5, 2022, low to the downside, which implies that the wave structure could likely lead to further downside ahead.
Challenging macroeconomic and monetary-policy environment, with a so-called Fed-pivot unlikely until inflation can be brought far below current levels—5-6% inflation, while encouraging given 8-9% earlier this year, will not effect a Fed pivot.
OPEX on Friday this week, leading to unexpected moves in price due to dealer and market-maker hedging, which can make directional trades more difficult than normal.
unfilled gap all the way up to $150.00, and given choppiness and recent upward momentum in indices, NVDA is unlikely to move down to new lows in a straight line.
Consider the following chart as well, which shows the volume ledges for NVDA. The resistance and supply overhead is extraordinary. Unless an investor is willing to wait potentially a very long time for NVDA to recover—and for institutions to step in and do the dirty work of putting in a final low—it may be best to watch and wait.
Supplementary Chart: 8-day and 21-day MA and Volume Ledges
Notice on the Supplementary Chart how the 8-day EMA has not yet been broken to the upside yet despite impressive strength in equity indices the last several days since the low on September 6, 2022. NVDA may break above the 8-day EMA to fill the gap. For the reasons listed above, trading NVDA right now is tricky and unpredictable.
Lastly, consider the VWAPs from all the major highs during this bear market. They're kind of foreboding and bearish, all towering far above the price. Gambling on anything other than a short-term pop or bounce in price is a low-probability bet.
Supplementary Chart B: NVDA's VWAPs placed at Major Swing Highs
Those with a fundamental analysis viewpoint may wish to rely on that instead, understanding that semiconductors and GPUs will drive AI and computers for decades to come. But the technicals suggest this fundamental view may not work out to reverse NVDA's downtrend for quite some time. Of course, bear rallies can occur in bear markets, and these can be sharp and powerful. But a fundamental-analysis viewpoint is essentially a disagreement with the market's price action, a tricky proposition given the market's impressive ability to discount all available information. Fundamental analysts believe that the market has mispriced a security or instrument, and that eventually, the market will agree with the analyst's view. Sometimes this works out well for careful analysts with billions available for research (think Warren Buffett and Berkshire Hathaway). For the rest of us, perhaps we should follow the price action for now. The author credits veteran fund manager and technical analyst David Lundgren as the source of this intelligent argument on fundamental analysis, which he has frequently has cited in interviews and publications.
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Please note that this technical-analysis viewpoint is short-term in nature and 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.
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.
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.
