Nvidia: After Surging 48%, It's Time For An Update (Technical Analysis, Rating Downgrade)

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NVIDIA (NASDAQ:NVDA) has achieved stellar capacity complete nan past month, starring nan banal to break retired from its downtrend and scope nan target I suggested connected January 12, 2022, while upgrading NVDA to a bargain position. As nan stock and nan manufacture benchmark are hinting astatine a higher likelihood of an upcoming weakness, it's clip for an update of my contingency plan, based connected nan astir apt scenarios I spot forming successful nan coming weeks. In this article, I explicate an actionable trading opportunity successful nan short term; I talk aggregate outcomes, while I ever analyse nan downside risk, by considering due stop-loss levels and actively managing nan consequence exposure.

A speedy look astatine nan large picture

Let's quickly talk nan applicable wide position arsenic nan US exertion assemblage has led nan rally group during January and continues to execute comparatively stronger compared to nan different sectors successful nan economy. Semiconductor manufacturers could execute a overmuch amended capacity successful nan past period than recorded nan period before, building affirmative momentum, on pinch companies successful nan user electronics, machine hardware, and package exertion industries. Most of those person been nan biggest losers successful nan past 12 months, apt showing nan top necessity for a retracement to offset nan antagonistic extension.

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The VanEck Semiconductor ETF (SMH) could proceed successful its beardown rally, by overcoming its EMA55, "the magic line", starring to a monumental breakout from its downtrend. The manufacture reference has mitigated its strongest guidance and confirmed its reversal, while aft weeks of rallying, nan benchmark could beryllium group for immoderate consolidation, arsenic it still faces immoderate insignificant overhead guidance and lately recorded a slowdown successful its comparative spot description erstwhile compared to nan broader exertion market, nan Nasdaq Composite (IXIC), aliases much narrowly nan Nasdaq-100 tracked by nan Invesco QQQ ETF (QQQ), while besides its momentum indicator, nan MACD, is hinting to a peak.

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Where are we now?

In my last article "Nvidia: A Setup That Cannot Be Ignored", published connected January 12, 2023, I underscored my position of seeing NVDA performing importantly good complete nan adjacent weeks, starring maine to alteration my sentiment connected nan banal from nan anterior antagonistic rating.

I see NVDA's regular chart, wherever some nan comparative spot compared to nan broader exertion market, nan Nasdaq Composite (IXIC), and nan MACD are signaling nan likelihood of much upside potential.

The banal was still hovering nether nan EMA55 connected its play and was facing nan EMA144 and further nan EMA200 connected NVDA's regular chart. However, nan buildup successful momentum was already remarkable, and I discussed respective outcomes I saw arsenic astir likely, while I suggested my penchant of seeing nan banal extending successful its activity 3 formation.

The existent uptrend would shape activity 3 of nan sequence. Here, nan astir apt targets are seen astatine $188, $218, aliases $268.

Investors who followed my telephone connected NVDA and jumped connected nan train could spot their profits peaking astatine 48% complete conscionable 1 month, while successful nan past fewer marketplace sessions, nan banal began hinting astatine a slowdown, which led maine to see my target reached while I besides want to update my contingency plan.

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NVDA looks rather extended successful nan short word based connected its EMA8, nan stock's MACD seems stretched, and nan momentum successful buy-side measurement is flattening. While I made those observations connected NVDA's play chart, it's important to zoom successful and corroborate my assumptions connected nan regular chart, arsenic I will besides trust connected this clip framework to specify nan adjacent steps successful my finance strategy.

What is coming next?

On NVDA's regular chart, nan MACD is confirming nan likelihood of exhaustion of nan beardown affirmative momentum. The comparative spot compared to nan broader exertion market, nan Nasdaq Composite (IXIC) is hovering beneath its average, but still not signaling a meaningful slowdown, while nan momentum successful buy-side measurement seems to drop, arsenic we observe much distribution days.

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While it is surely imaginable to spot nan banal advancing further and retracing supra nan 50% Fibonacci retracement level measured from nan October bottom, I see a higher likelihood of seeing NVDA reversing, successful nan effort of forming activity 4 of what I spot arsenic its Elliott upward impulse sequence. Here, nan retracement should not widen nether nan value level of activity 1, which is hinting astatine a bottommost astir apt betwixt $188 and $196.

The successful statement of activity 4 would lead NVDA to move into activity 5, which contempt it being early to make immoderate reliable projection, could widen astir most apt betwixt $275 and $300. This script is surely encouraging and immoderate investors whitethorn take to clasp connected to their position to not miss nan chance to spot nan banal surging, but what if activity 4 fails and nan apt upcoming retracement extends into nan territory of activity 1? In this case, nan full statement has to beryllium considered arsenic grounded and nan chances are precocious that nan banal would either statesman a caller downward movement, aliases nan activity aft activity 5 would travel nan grounded activity 4 successful its antagonistic extension.

Based connected my observations, and acknowledging that nan banal reached my target, I see it much logical to beryllium connected nan sidelines and show nan upcoming value action. The institution is besides approaching its upcoming Q4 and FY2023 financial results event, expected connected February 22, which could adhd immoderate volatility. I would surely not adhd immoderate caller position astatine this point, arsenic nan risk/reward floor plan is not favorable.

Investors who for illustration to support their position could see mounting a trailing extremity nonaccomplishment nether nan EMA21, pinch successful mind that if nan banal falls beneath $188, nan chances are precocious to spot moreover much downside. Here I would peculiarly observe really nan banal will adjacent this week and if nan momentum whitethorn prime up again aliases proceed to weaken.

After nan beardown caller rally, and by considering nan likelihood of nan discussed scenarios, I set my standing connected NVDA downgrading nan banal to a clasp position. The banal collapsed retired of its downtrend, and long-term-oriented investors whitethorn see it if nan presumption of a successful activity 4 statement is confirmed.

The bottommost line

Technical study is not an absolute instrument, but a measurement to summation investors' occurrence probabilities and a instrumentality allowing them to beryllium oriented successful immoderate information is listed connected nan markets. One would not thrust towards an chartless destination without consulting a representation aliases utilizing a GPS. I judge nan aforesaid should beryllium existent erstwhile making finance decisions. I see techniques based connected nan Elliott Wave Theory, arsenic good arsenic apt outcomes based connected Fibonacci's principles, by confirming nan likelihood of an result contingent connected time-based probabilities. The intent of my method study is to corroborate aliases cull an introduction constituent successful nan stock, by watching its assemblage and industry, and astir of each its value action. I past analyse nan business of that banal and cipher apt outcomes based connected nan mentioned theories.

The semiconductor manufacture has recorded a beardown period starring nan manufacture benchmark to break retired from its downtrend, while nan astir caller improvement whitethorn hint astatine nan impermanent exhaustion of this trend. NVDA has formed activity 3 of its Elliott impulse series and I expect nan banal to backtrack into activity 4. The achieved upward activity led NVDA to scope my target and based connected nan observed situation, I now determine to return my profits from nan array and hold connected nan sidelines. I would surely not adhd immoderate caller position, while investors who want to support their vulnerability to NVDA, whitethorn see nan discussed stop-loss prices arsenic it would beryllium a pity to springiness backmost nan achieved performance. The caller developments led maine to reevaluate my contingency scheme and NVDA's rating, which I now see to beryllium a clasp position.

Full-time trader pinch 18+ years of acquisition successful stocks. Master's Degree successful Management specialized successful Finance and Strategy. It’s each astir managing nan risk: Being incorrect is unavoidable, staying incorrect is simply a choice. While I bask giving my sentiment connected semipermanent finance opportunities, my attraction is oriented toward momentum and mid-term position trading, arsenic I leverage my proficiency successful basal study and harvester selected quantitative metrics and theories successful method analysis.