Nvidia’s stock price showed signs of stabilizing after a massive selloff that wiped out $430 billion from its market value. The stock rose as much as 5% on Tuesday, aiming to break a three-day losing streak that pushed it into its first technical correction (a drop of 10% or more) since April.
While the recent downturn is concerning, analysts are focusing on Nvidia’s long-term trajectory. They acknowledge that technical analysis based on historical trading patterns isn’t an exact science, but it can still be a valuable tool for investors.
Stock Price Earning
The constantly rising demand for Nvidia’s artificial intelligence computing chips caused the company’s stock to surge this year. Between the business’s May earnings report and the June 18th peak, the stock price increased by 43%, temporarily overtaking Microsoft as the most valuable company in the world. Even with the most recent pullback, Nvidia’s stock has still increased by an astounding 144% this year.
Is the Recent Drop Just a Temporary Blip?
One reason for the recent spike in Nvidia’s stock price was the huge volume of options trading. A gamma squeeze occurred as a result of market makers selling options contracts having to continually buy and sell the underlying stock (Nvidia) when its price rose in order to hedge their positions. Considering that the stock has now corrected, the purchasing pressure might be decreasing.
Key Support Levels and Long-Term Outlook
Analysts like Buff Dormeier, chief technical analyst at Kingsview Partners, identify a potential support level around $115 for the stock. This price point coincides with a key Fibonacci retracement level, a tool used by technical analysts to predict areas of support or resistance.
Dormeier and other observers think Nvidia’s long-term uptrend is still intact, but they are closely monitoring the $100 mark.
According to Bruce Zaro, chief technical strategist at Granite Wealth Management, a stock in an uptrend like Nvidia’s wouldn’t necessarily be in serious danger if the first support level were broken. He did, however, issue a warning, pointing out that a decline below $100 might indicate that investors should exercise patience—particularly in light of the possibility of market volatility in the run-up to the elections and Federal Reserve interest rate decisions.
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