Why Nvidia Looks Ready to Rebound as the Market Rebounds
NVIDIA Corporation NVDA continued its nine-day descent on Monday, losing 3.9% to start the session and closing the trading day down another 1.34%.
The stock has plunged more than 24% since hitting a high of $289.46 on March 29 amid general market turmoil, which accelerated on Monday when Baird downgraded Nvidia from Outperform to Neutral and lowered its price target from $360 to $225.
On Tuesday, in pre-market, Nvidia rebounded slightly, paralleling the over-market, despite KeyBanc announcing that it would maintain an overweight rating on the stock, while lowering its price target to $310.
The Consumer Price Index (CPI) report, which measures inflation, came in slightly above expectations, although the White House warned on Monday that it expected a spike in consumer prices in because of Russia’s invasion of Ukraine. US consumer prices for the month of March came in at 1.2% month over month, compared to the consensus estimate of 1.1%.
Whether Nvidia’s rebound can eventually turn into a rally, or if the stock will rebound just enough to print a lower high before continuing its descent will take some time to know, but the stock has a lot of work to do. before reversing course into an uptrend.
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The Nvidia chart: Nvidia began trading in a downtrend on March 29, with the latest lower high printed on April 4 at $275.58 and the most recent confirmed low set at $262.67 on April 1. Since forming the last lower high, Nvidia has fallen over 20% lower without bouncing on the daily chart.
- To continue its downtrend, the stock will eventually need to rebound to print another lower high, which could give bearish traders not already in position a solid entry to take a short position. Bullish traders who are not already in position will want to watch if Nvidia can start printing an uptrend on shorter timeframes, which could then turn into an uptrend on the daily chart.
- On April 7, Nvidia lost support at the 200-day simple moving average (SMA), which is seen as an indicator of bearish sentiment versus long-term bullish sentiment. If the security is unable to quickly regain the 200-day SMA, the 50-day SMA should break below the 200-day, which would cause a death cross to develop on the chart.
- Nvidia has two spreads above, the first between $223.20 and $230.62 and the second between $253 and $258.20. The gaps on the charts close about 90% of the time, making it likely that the stock will rise to fill both empty trading ranges going forward.
Nvidia has upper resistance at $230.43 and $252.59 and lower support at $208.88 and $195.55
See also: How to read candlestick charts for beginners
Photo: Courtesy of nvidianews.nvidia.com