Nvidia Charts Warn Market Players to Look Out Below

Nvidia Corp ( NVDA) is falling without a parachute here on Friday morning on third-quarter results that missed on sales and downward guidance that is due in part to a drop in demand for chips used in cryptocurrency mining. Things are always exciting on the way up, but when a turn comes one needs to get out of the way. The last time we looked in on NVDA was in early October. At that time I wrote, “NVDA has had a huge advance the past three years. It looks like the time has come for a meaningful correction or setback. Will NVDA go down to the Point and Figure price target of $179? We’ll see.” NVDA reached that $179 price target by the end of the month and before Friday’s opening bell is trading well below it. Let’s check the charts once more.


In this daily bar chart of NVDA, below, we can see that the technicals have weakened since our last check. The slopes of both the 50-day moving average line and the slower-to-react 200-day line are negative. The 50-day line just crossed below the 200-day line for what is commonly called a death cross. This late sell signal can be effective in trending markets. The daily On-Balance-Volume (OBV) line has declined from early October and tells me that sellers of NVDA have been more aggressive. The Moving Average Convergence Divergence (MACD) oscillator is well below the zero line in sell territory and should cross to the downside once again.





In this weekly bar chart of NVDA, below, we can imagine that prices could open around $160 and then we can notice that the next possible area of chart support in the $120-$100 area from early 2017. Prices are below the declining 40-week moving average line. The weekly OBV line is pointed down and the weekly MACD oscillator is below the zero line, which has not happened in three years, for an outright sell signal.



In this Point and Figure chart of NVDA, below, the overnight price action is not plotted. The chart is projecting a very bearish downside price target of $61, but the volume-at-price information on the left side of the chart shows the $102-$98 area as a potential support zone.





Bottom line strategy: Nvidia is going to send the longs to their medicine cabinet looking for something to calm their stomachs. A large gap to the downside is likely and the $180-$190 area is now likely to act as resistance. Prices could hold around $160, but the $120-$100 area is where I would anticipate prices to reach in the weeks ahead.

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2018-11-16 05:31:00

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