Wall Street witnessed a seismic event last Friday as a sweeping wave of selling rattled the tech giants, with Nvidia Corporation (NASDAQ: NVDA) taking a notable hit.
Shedding 10% in a single trading session, Nvidia’s stock plummeted to $762 per share, marking its steepest decline since the onset of the Covid pandemic in March 2020. The repercussions rippled through the AI sector, amplifying concerns over the market’s frothy dynamics.
The catalyst? Super Micro Computer (SMCI), another AI heavyweight, stirred unease by withholding its customary preliminary earnings data, triggering a sharp selloff that engulfed the entire AI trend, including Nvidia. Analysts, however, maintain optimism about Nvidia’s upcoming earnings report, slated for May 22, projecting a robust 38% profit growth for the first quarter.
As investors brace for volatility ahead, chart analysis offers valuable insights into potential entry and exit points. Now, let’s take a closer look at what the charts reveal about NVDA’s near-term and long-term prospects.
Breather after surgeNvidia’s long-term charts tell the story of a stock that has seen several bull runs along the way. Initially propelled by the Bitcoin mining frenzy, the stock surged tenfold from $6 to over $40. Subsequently, amid the post-COVID rally, it soared nearly sevenfold from sub-$50 levels to a peak near $350.
However, following this second surge, NVIDIA endured a bearish phase lasting over a year, crashing to below $110. Emerging from this downturn, the stock embarked on a renewed bullish phase in 2023, as indicated by the ‘Long-Term Bullish Trend’ on the charts.
Though the stock remained range-bound for most of the second half of 2023, it resumed its upward trajectory aggressively in January 2024, which catapulted it to a high of $974 earlier in March.
The silver lining for long-term investors is that despite the recent fall, the stock has only concluded the manic bull run that began in January. As of now, its long-term bullish trend remains intact. Investors should be concerned only if the stock dips below $660, its immediate support level, as this could also jeopardize its long-term bullish trend.
Short-term moves could sting
In the dynamic world of trading, prudence is not just a virtue but a necessity, especially when it comes to a volatile stock like NVIDIA. Amidst its recent rollercoaster ride, traders must tread carefully, considering both long and short positions with caution.
With the stock holding above the $660 mark, there’s a lingering potential for a rebound, suggesting that traders who aim to short the stock following Friday’s substantial 10% drop must exercise vigilance. On the flip side, those contemplating long positions should establish robust stop losses in the vicinity of $660 to safeguard against potential downside risks.
In the event of a rebound, anticipate initial resistance near the $890 mark. For traders considering short positions, initiating at this level may prove strategic, with the all-time high of $974 serving as a prudent stop-loss.
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