In the fourth quarter, Nvidia (NVDA) – Get NVIDIA Corporation Report stock was hitting all-time highs. The graphics-chip specialist was joined by Advanced Micro Devices (AMD) – Get Advanced Micro Devices, Inc. Report and a handful of high-quality growth stocks.
We at that time faced a bifurcated market. The S&P 500 and Nasdaq were at all-time highs, despite several notable growth stocks trading at bear-market levels.
Through the volatility we’ve seen so far this year, most semiconductor companies continue to do well. Qualcomm (QCOM) – Get Qualcomm Inc Report, Texas Instruments (TXN) – Get Texas Instruments Incorporated Report, Taiwan Semiconductor (TSM) – Get Taiwan Semiconductor Manufacturing Co. Ltd. Report and ON Semiconductor (ON) – Get ON Semiconductor Corporation Report all reported solid results with strong outlooks.
Perhaps most related to Nvidia is AMD, which reported a strong quarter and provided better-than-expected guidance. That bodes well for Nvidia, which reports earnings next week.
Positive prospects aside, Nvidia stock has fallen 55% from peak to trough.
Perhaps we’ve seen the low, but perhaps not — no one knows with a high degree of certainty.
What I can say is that long-term Nvidia bulls may be wise to start accumulating the stock since it’s been cut in half from the highs. While the stock and valuation have come tumbling lower, expectations have not.
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In fact, revenue estimates for this year and next year continue to climb. Can we hit bottom and turn higher from here?
At its highs, the valuation was a reasonable argument to be bearish on Nvidia. With the stock down 50%, however, that argument seems to have run its course. (Obviously, that doesn’t mean the market won’t continue to indiscriminately sell the stock.)
If that’s the case, bulls need to keep a close eye on the $150 to $160 area. Not only did Nvidia stock recently bottom in this area, but it’s a significant area of confluence.
We have the 61.8% retracement, as measured from the all-time high down to the March 2020 covid-19 low, as well as the 161.8% downside extension from the current range. It’s also a prior breakout area from 2021.
If this zone fails as support and the semiconductor space — which has shown some decent strength lately — comes back under pressure, then Nvidia stock could be looking at a test of the $125 to $128 area. Just below this area is the 200-week moving average.
On the upside, it’s clear that the $182.50 level is giving Nvidia stock some trouble. If the stock can clear this level and stay above it, $200 and the declining 10-week moving average are within reach.
Above $210 and the upside really opens up, potentially putting the 21-week and 50-week moving averages in play, currently up near $230 to $235.