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Key Takeaways
- Even as AI darling Nvidia joined the exclusive $3 trillion market capitalization club on Wednesday, the charts indicate momentum may be waning for the stock.
- Declining trading volumes and a bearish divergence between the price and RSI indicator on Nvidia’s chart signals the potential for a reversal.
- Key Fibonacci retracement levels where Nvidia shares may find support include: $798, $666, and $535.
Nvidia’s (NVDA) market capitalization leapfrogged that of Apple (APPL) on Wednesday as the chipmaker joined the exclusive $3 trillion club. Despite the impressive milestone, several chart indicators suggest momentum may be waning for the stock. Below we take a closer look at the stock’s significant moves over the past 19 months using technical analysis and identify potential support areas during periods of profit-taking.
Since bottoming out just below the 200-week moving average (MA) in October 2022, Nvidia shares have continued to trend sharply higher, with retracements from February last year onwards not having enough selling pressure to reach the 50-week MA.
After a remarkable run of eleven consecutive green weekly candlestick bars between January and March, the stock staged a four-week correction of around 20% through the first half of April, but quickly resumed its uptrend as buyers snapped up the dip in the lead-up to the company’s quarterly results last month.
Following another blowout earnings report, the price has continued to climb to new highs, finishing Wednesday’s session at a record close. The stock added 5.2% to finish Wednesday’s session at $1,224.40.
Signs of Waning Momentum on Nvidia’s Chart
Despite Nvidia’s strong upward trend, declining trading volume accompanying the most recent move higher indicates momentum may be starting to wane ahead of the stock’s highly anticipated 10-for-1 split, which takes effect after Friday’s closing bell.
In addition, although the stock has made higher highs, the relative strength indicator (RSI) has made a lower high, indicating a bearish divergence, a technical event that warns of a potential reversal.
Monitor These Key Fibonacci Levels Amid Profit Taking
We can identify possible key retracement levels by applying a Fibonacci grid stretched from the stock’s October 2022 low through to Wednesday’s record high.
The first support sits at the 38.2% Fib retracement level around $798, which also coincides with the April correction low. The key 50% Fib retracement level marks another potential support area situated around $666, a region on the chart that sits in close proximity to the rising 50-week MA. A deeper pullback would likely find buying interest at the 61.8% Fib level around $535, an area that aligns closely with top portion of a period of consolidation in Nvidia shares between July and December last year.
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