The first half of 2024 saw Nvidia Corp. (NVDA) riding high on the A.I. frenzy, with stocks like Nvidia reaching extremely high valuations. However, recent chart analysis suggests that the dominance of mega cap growth stocks may be coming to an end. The short-term chart of NVDA shows a series of bearish engulfing patterns in mid-June and mid-July, indicating a potential reversal in sentiment.
As Nvidia tests the $140 mark, traders have been selling into strength, leading to a 15% decline from recent all-time highs. The failure to push past the peak from July around $135 suggests a potential stall in the long-term uptrend. Should NVDA break below the $120 support level, it could signal a new swing low and a deeper retracement.
If Nvidia drops below $120, the next downside target could be around $100, representing a 30% decline from the June peak. This level coincides with the 61.8% Fibonacci retracement level and the 200-day moving average. Such a decline could have a significant impact on major indexes like the S & P 500 and Nasdaq 100.
If Nvidia is able to establish a lower around current levels and break above the June and July highs, there could be significant upside potential for this mega cap semiconductor stock. However, the charts suggest a more cautious approach into August may be the more likely scenario.
While Nvidia has been a darling of the A.I. sector, recent technical analysis indicates potential downside risks. Traders should monitor key support levels like $120 and $100 for clues on the stock’s future direction. Additionally, keeping an eye on broader market trends and index performances could provide valuable insights into Nvidia’s trajectory. It’s essential to approach investing in Nvidia with caution and careful risk management in the current market environment.