NVIDIA Analysis: A Pattern Similar to Its Past?! 24.12.31Hello, this is Greedy All-Day.
Today's analysis focuses on NVIDIA.
Daily Chart Overview
Let’s begin with the daily chart.
From May 2023 to January 2024, NVIDIA remained in a range-bound market marked by the yellow box, with a range between approximately 39 and 51.
After breaking out above the green box, NVIDIA experienced a one-way rally, as seen in the candles within the blue box.
Since April 2024, NVIDIA has been forming a new pattern: a rising wedge.
About the Rising Wedge Pattern
This pattern typically suggests a bullish continuation during its formation. However, if the support zone at the bottom of the pattern is broken, it can signal a trend reversal or even a drop to the starting point of the pattern.
For NVIDIA, this would mean a break below the red box, potentially leading to a drop to the 75 level, which marks the start of the pattern.
Considerations
The pattern is not yet complete, as it requires a confirmed breakdown to be validated.
Currently, the stock price is moving upward, forming higher lows, indicating potential consolidation for a strong upward move. For now, this is something to monitor rather than act on immediately.
Preparing for Potential Scenarios
Even when looking at NVIDIA’s last 5 years of data, the stock has shown significant corrections during long-term trend reversals:
Minimum correction: 42%
Maximum correction: 66%
At the current stage, while the possibility for further upward movement remains, a break below the red box would signal a completed rising wedge pattern.
The pattern’s target zone suggests a drop of approximately 50% from the recent high.
A breakdown from the red box could lead to an immediate correction of around 35%.
Being prepared for such a trend reversal can be a prudent approach.
Buying Strategy
Where would be the best entry points for buying NVIDIA? Here’s the strategy:
1st Entry Zone: 75 (White Box)
Reason: This level corresponds to the start of the rising wedge pattern, aligning with the support zone seen in the blue box above.
2nd Entry Zone: 50 (White Box)
Reason: This level marks the upper boundary of the range formed from May 2023, which previously acted as resistance but is now expected to act as support. Significant buying activity is likely to hold this level.
Additional Evidence
In the orange box, the previous one-way upward trendline (white trendline) was broken in the purple box, causing a decline to the starting point of the rally before rebounding.
Similarly, in the red box, after forming a range-bound market with supply zones, NVIDIA created a rising wedge pattern like the current one, ultimately dropping to the pattern’s start before rebounding.
Based on this evidence, I recommend 1st and 2nd entry zones for safer buying opportunities.
Why Not Consider Breakout Trades?
Personally, I believe NVIDIA has become too expensive, which is why aggressive breakout trades are not part of this strategy.
Conclusion
NVIDIA is currently forming a critical pattern, and while there’s potential for further upside, it’s essential to prepare for potential trend reversals. Following the outlined strategy with well-considered entry points can help mitigate risk and maximize opportunities.
