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Is Nvidia Finally Topping Out?

By Capital.com News

09:48, 7 September 2023

Any material provided is for information purposes only and is not investment advice. Any opinions that may be provided are not a recommendation by Capital Com or its agents. We do not make any representations or warranty on the accuracy or completeness of the information that is provided If you rely on the information on this page then you do so entirely on your own risk.

Nvidia, the chip manufacturer, has unquestionably been the standout stock of the year, driven by the increasing demand for its 'supercomputer' chips that are playing a key role in the AI revolution.

The company's shares have experienced a remarkable uptrend, surging by an impressive 227% year-to-date. However, we are starting to see some subtle signs that Nvidia’s share price might be nearing a turning point.

Before we break down why Nvidia’s powerful uptrend might be coming to an end, let’s take a look at the year-to-date view on the daily candle chart:

NVDA Daily Candle Chart YTD

snapshot

We can see that Nvidia’s shares have been running relentlessly higher since the turn of the year with prices comfortably above the 50-day and 100-day simple moving averages.

Whilst calling the end of established trends like this tends to be foolish, we are seeing some signs that Nvidia’s share price may be due for a deeper retracement.

Let’s zoom in and take a closer look at Nvidia’s recent price action:

NVDA Daily Candle Chart Zoomed View

snapshot

On this zoomed view we can see that during the last two weeks, Nvidia’s share price has struggled to break and hold above resistance at $480.85.

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We’ve seen multiple dark cloud cover patterns print at resistance – this pattern is created when the market gaps higher at the open only to end the session back within the previous days range.

And this week, we have seen the shares attempt to hold above resistance only for the market to close lower during yesterday’s session.

It is also worth noting that whilst prices have continued to carve out a series of higher swing highs and higher swing lows, the Relative Strength Index (RSI) has been trending lower.

This negative divergence on the RSI, combined with the recurring failures at resistance indicate that selling pressure is starting to build and we could start to see some profit taking.

Risk management

Counter-trend trades pose the risk of the established trend continuing, so traders should always use prudent risk management.

For stop placement, traders could use the recent highs or a multiple of Nvidia’s average true range (ATR).

On the calendar, we have Nvidia’s appearance at the Citi Global Technology Conference today (7th September) and Nvidia’s appearance at the Bank of America Global AI Conference on 11th September. These events have the potential to increase the volatility of Nvidia’s share price.

It is also worth noting that Nvidia’s share price will be sensitive to global macro-economic data and events.

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Capital Com is an execution-only service provider. The material provided in this article is for information purposes only and should not be understood as investment advice. Any opinion that may be provided on this page does not constitute a recommendation by Capital Com or its agents and has not been prepared in accordance with the legal requirements designed to promote investment research independence. While the information in this communication, or on which this communication is based, has been obtained from sources that Capital.com believes to be reliable and accurate, it has not undergone independent verification. No representation or warranty, whether expressed or implied, is made as to the accuracy or completeness of any information obtained from third parties. If you rely on the information on this page, then you do so entirely at your own risk.

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