Jim Cramer told his Mad Money viewers Monday night, the first trading day of the new year, that investors can "shop the drop" and pick up great stocks as they head lower, but only if they fit one of his 10 investable themes for 2021.
E-commerce is here to stay, making it the first of Cramer's investable themes. The return of travel and leisure was second on Cramer's list, as was the continuing digitization trend, which includes semiconductor makers like Advanced Micro Devices (AMD) and Nvidia (NVDA) .
We have not looked at NVDA in a while so let's check. Our last review was September 25 where we wrote, "The weekly bar chart of NVDA looks unstoppable but prices ebb and flow over time and the movement of the broader market can have a big impact. Traders, and maybe even investors, should raise stop protection to a close below $470. Personally, I hate to give back profits to the market and I know I can always rebuy a stock in the future."
Prices have stayed above our $470 stop recommendation so I will assume traders are still long.
In this updated daily bar chart of NVDA, below, we can see that prices have been trading sideways around $525 for several weeks. NVDA has crossed above and below the 50-day moving average line several times. Trading volume has been shrinking the past four months.
The On-Balance-Volume (OBV) line has been largely flat the past three months suggesting we are seeing a balance between buyers and sellers.
The Moving Average Convergence Divergence (MACD) oscillator has been weakening since early September and is now just below the zero line in sell territory.
In this weekly bar chart of NVDA, below, we see a mixed picture. Prices are still in an uptrend above the rising 40-week moving average line but the weekly OBV line has leveled off and the MACD oscillator is in a decline.
In the Point and Figure chart of NVDA, below, we used daily price data. A trade at $508.13 or lower is likely to weaken this chart.
Bottom line strategy: NVDA is likely to trade to new highs in 2021 but the first quarter of 2021 could be a little tricky as many tech names are looking vulnerable. I would recommend a tighter sell stop at $499.