Amidst the A.I. frenzy that propelled stocks like Nvidia Corp. (NVDA) to record high valuations in the first half of 2024, signs of a potential reversal are starting to emerge. The short-term chart of NVDA reveals a series of bearish engulfing patterns in mid-June and mid-July, indicating a shift in sentiment among traders. With the stock already down about 15% from its recent all-time highs, it is crucial to assess the likelihood of a further retracement of the long-term uptrend.
The peak from earlier in July around $135 serves as a confirmed lower high, signaling a potential stall in the long-term uptrend. However, as long as NVDA establishes a higher low on the subsequent pullback, the uptrend could still be intact. Currently trading around $120, Nvidia is testing the most recent swing low in mid-June, a level that aligns with a 38.2% Fibonacci retracement and the 50-day moving average.
If NVDA breaks below the $120 support level, it would mark a new swing low and a failure to hold the first Fibonacci support level, potentially opening the door for further downside. In such a scenario, the next downside target could be around $100, representing a 30% decline from the June peak. This level coincides with the 61.8% retracement level and the 200-day moving average, indicating significant support.
A drop to $100 for Nvidia could have broader implications for the market, particularly the S & P 500 and Nasdaq 100, given the stock’s weight in those indexes. A significant decline in Nvidia could weigh heavily on these indexes, potentially leading to broader market weakness.
While there is still potential for Nvidia to rebound if it establishes a higher low and breaks above the June and July highs, the charts are pointing towards a more cautious approach in the coming months. The uncertainty surrounding the stock’s trajectory suggests that investors should closely monitor key support levels and price action to make informed decisions.
Amidst the A.I. frenzy that drove Nvidia to record highs, caution is warranted as signs of a potential reversal emerge. Monitoring key support levels, such as $120 and $100, will be crucial in assessing the stock’s future trajectory. Additionally, considering the broader market impact of Nvidia’s performance is essential for investors looking to navigate the uncertainties ahead.