Nvidia (NVDA) shares have captured the market's attention in recent weeks with a blowout earnings report and its apparent command of the AI market and the future of everything. The market is a discounting mechanism and perhaps the latest chart action and indicator readings suggest a change in direction.
Let's check the charts of Nvidia to hear what they have to say.
In this daily Japanese candlestick chart of NVDA, below, I can see some problems for the bulls. The candles in the past few sessions show a top reversal pattern in this time frame. I see a bullish white candle followed by two back-to-back doji patterns indicating a pause or balance. A doji has the same or nearly the same open and close. This means the bulls and bears are in balance. The balance is upset with a red or bearish candle this past Friday. Prices remain above the rising 50-day moving average line and above the rising 200-day line. The trading volume has decreased since the first test of the $500 level despite the increased coverage of the stock in the media and recent jump in price targets by the sell side.
The On-Balance-Volume (OBV) line has equaled its June high but it has not made a new high like prices have. The 12-day price momentum study shows weaker momentum from June to August even though prices made higher highs. This is a bearish divergence and can foreshadow weaker prices ahead.
In this weekly Japanese candlestick chart of NVDA, below, we get a different perspective on the price action. Here I can see two distinct upper shadows above $480. Upper shadows tell us that traders have rejected the highs. The volume histogram shows us an active level of trading the past year but it does not show an increasing pattern. The weekly OBV line shows strength from last October and a new high for the move up unlike the daily OBV line. The 12-week price momentum study shows a peak in July and a lower reading in August.
In this daily Point and Figure chart of NVDA, below, I can see the software is projecting a downside price target in the $400 area.
In this weekly Point and Figure chart of NVDA, below, I see an upside price target in the $695 area. A trade at $400 could turn this chart bearish.
Bottom line strategy: Is Nvidia NVDA a performer with no encore? NVDA posted this incredible earnings report last month and the question is what could top it? It reminds me of the CEO being interviewed about the quarter and he/she says "It couldn't be better" If the quarter couldn't be better, then the next quarter will be weaker.
Traders who are long NVDA from lower levels should consider taking profits and/or raising sell stop protection to lock in gains.
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