Saturday, August 13, 2016

NVDA NVIDIA Monthly Chart Parabolic Price Move

NVDA is all the rage on Wall Street these days. NVIDIA provides chips and components for the latest technology such as virtual reality and autonomous cars. Traders are tripping over each other to buy the stock at any price. It is in the parabolic, greater fool, stage right now.

The green lines show the sideways triangle breakout from 14. The vertical sides of the triangle forecast a move from 18 to 30 handles, thus, a target at 32 to 44, but price blew through these levels like they were standing still. The brown channel is a long-term sideways range. Price broke out and has not yet back kissed this key trend line at 22-24. Once the hype began on the stock and it became Wall Street's latest favorite flavor, price went parabolic. Note the large volume selling candlestick for that big move higher four months ago. Price will need to come back down to test this area again and see if the volume can remain strong to prove that up is the path ahead, or not.

The stochastics are cooked with negative divergence and overbot conditions. Money flow is neggie d (red line). Thus, price needs to pull back now in the monthly time frame to take a rest, however, the other indicators are long and strong so new highs will come afterward. There will be a jog pattern ahead, likely 3 jogs, to set up the MACD line with neggie d. Thus, for the sake of discussion, NVDA will likely move down in Aug-Sept, then up in September to new highs, then down again in say, late September and October, then up one more time in October or November, then that should be a multi-month and likely multi-year top. Since NVIDIA is tied into the new technology joy and is a momentum play, it will maintain upside juice over coming weeks. It should all be priced in before the end of the year, however.

The stock will likely move into choppy sideways behavior through 56-68 for the coming months topping out at 64-68 in October-December. The chart's progress will have to be monitored along the way and adjustments can be made to the forecast if needed. NVDA may develop in to a nice trading stock as it moves into a sideways choppy pattern. Those buying as a long term buy and hold hoping to see lots more upside will likely be disappointed.

Being long is not attractive even though the hype may push it higher in spurts. NVDA should pull back over the next month (say to 60-ish) and that is more attractive as a potential long; traders will be lunging at it on the long side and send it back up. A rally will  kick in again to satisfy the monthly chart as described, say back up to 63-67. Then probably down to 56-62 due ot more negative divergence. Then back up for the top at 63-68 when all indicators on the monthly chart are negatively diverged.

NVDA may be a better trading stock rather than buy and hold going forward. Keystone has no position in NVDA and will likely not play it. You always want to avoid shorting stocks that are parabolic and have momentum. A quickie long play in the very short term after it pulls back to 59-62 may be an attractive approach. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.

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