U.S Stock Selection: NVIDIA at risk of another downleg as G20 looms
Kelvin Wong June 24, 2019 10:29 AM
NVIDIA is shaping a "bearish flag" configuration.
click to enlarge charts
In our previous report dated 02 May 2019, the share price of NVIDIA (NVDA) had tumbled as expected and hit the downside target/support of 153.40 on 20 May 20019.
It has continued to inch downwards and printed a low of 132.60 on 03 Jun 2019 before it staged a recovery of 18% to print a recent high of 157.33 on 20 Jun 2019 assisted by an increasing dovish monetary policy stance adopted by the Fed. In the coming few weeks, the focus will shift back to the progress on the on-going trade tensions between U.S. and China as NVDA is one of the U.S. key semiconductors firms that its operations will be affected significantly if the trade tensions continue to escalate. Paramount will be this week G20 summit on 28 to 29 Jun where U.S President Trump will meet with China President Xi on the side-lines to discuss about matters related to the U.S-Sino trade relations.
Key technical elements
- The recovery 18% seen in NVDA from its 03 Jun 2019 low of 132.60 has taken on the form of a “bearish flag” configuration coupled with a lower average volume seen in the past 15 days. These observations suggest the recovery is a potential “dead cat bounce” within its medium-term downtrend in place since 10 Apr 2019.
- The daily RSI oscillator has tested and retreated from a significant corresponding resistance at the 55 level.
- The key medium-term resistance stands at 163.90 which is defined by the former ascending support from 24 Dec 2018 low and the 50% Fibonacci retracement of the previous decline from 10 Apr high to 03 Jun 2019 low.
- Relative strength analysis from the ratios of NVDA against its industry sector (PHLX Semiconductor SOXX) and the U.S. benchmark stock index (S&P 500) have continued to exhibit medium-term weakness/underperformance.
Key Levels (1 to 3 weeks)
Intermediate resistance: 157.33
Pivot (key resistance): 163.90
Supports: 147.06, 131.60 & 124.50
Next resistance: 192.83
If the 163.90 key medium-term pivotal resistance is not surpassed and a break below 147.06 (the lower boundary of the “bearish flag”) is likely to reinforce the start of another potential downleg to target 131.60 support with a maximum limit set at 124.50 (the 24 Dec 2018 major swing low).
On the other hand, a clearance with a daily close above 163.90 invalidates the bearish scenario for an extension of the corrective rebound towards the next resistance at 192.83.
Charts are from eSignal
Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.