Nvidia’s stock is declining here among this mid-summer tech stock swoon in favor of small caps because as Steve Eisman so effectively stated on CNBC, “people woke up and decided I want to own something else for a while.” Eisman said nothing really has changed in the underlying fundamentals and we echo Steve’s insight; investors feel the tech growth trade has come too far, too fast and the stock is being sold off. Let’s take a look at the underlying technicals, analyst’s earnings expectations of Nvidia (NVDA) going forward, and see if we can identify an area of support that will complete the summer swoon. To start let’s examine the 200-day moving average on the daily chart below shown as a dashed blue line. First two things about the 200-day you’ll want to notice is first it’s trending higher and second the stock price is still well above the 200-day MA. Take a deep breath and remind yourself that this historic stock is still in a well-established uptrend. Not shown on the chart, but since we broke above the 200-day MA in Jan ’23 NVDA is about 540% higher since that move even after the recent selloff. We’re still more than 34% above the moving average. Looking back to the most recent correction in April, that was the support level of the price-to-moving average spread: 34%. We could be approaching a support level based on this analysis. If the selling continues we do have a pair of 16% readings on the indicator from late 2023, which means the spread could narrow to reach that level. This could occur by price continuing to move lower along with the moving average trending higher as the recent higher price readings factor into the average. Or, another possibility is NVDA falls into a consolidation as we wait for earnings at the end of August, which would allow the moving average to trend higher closing the gap. Examining a different set of analysis on the daily chart, we see an uptrend support line (red dashed) that should intersect the stock price at around $96-$93 depending on the continued rate of share price decline. This also corresponds to this year’s breakout level of $96 that will also offer support. At the bottom of the chart you’ll notice a very important factor to help understand the seller’s conviction in this sell-off: volume. The 50-day moving average of the daily volume totals is clearly in a decline since April. Summarizing that, the urgency of selling is waning. We currently hold a 6% allocation of NVDA in our growth portfolio at Inside Edge Capital with 2% cash on the sidelines waiting to add to our holdings in NVDA. In our ‘fast money’ Active Opps model at my research business TradingAnalysis we are long NVDA, but also carrying a $115/$100 put spread hedge that expires on August 2nd. My belief is that we’ll probably dip below the psychologically important $100 round number, but based on the technical and fundamental outlook of continued explosive earnings growth the stock shouldn’t get too far below the mid-$90’s before the lows are found. -Todd Gordon, Founder of Inside Edge Capital, LLC DISCLOSURES: ( Gordon owns NVDA personally and in his wealth management company Inside Edge Capital. Charts shown are MotiveWave and Schwab’s ThinkorSwim.) All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, NBC UNIVERSAL, their parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL’S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.
