NVIDIA is the Artificial Intelligence poster child and CEO Jensen is considered, especially if you ask him, the Second Coming. Jesus walked on water and Jensen wants to do a little bit of that walkin' too as Charlie Daniels sings. Humans are fun to watch. AI, schmy. It's more over-hyped stuff as overpaid programmers and techies try to develop new technology and software to keep their jobs. Keystone has one thousand books in his library that are pre-1910 the oldest are over 200 years old. None of this information is on the internet so how can AI be all-knowing? It's not.
AI is an instant aggregator of internet information mainly geared around language models and will help a bit with productivity but are we at the point where the cost of the improvements are not worth the money? It takes a lot of power and electricity to run those servers. The Law of Diminishing Returns.
NVDA is the stock darling on Wall Street these days. Analysts and television talking heads tell you that if you don't own NVIDIA, you don't know Jack. Joe Sucka, Jane Winedrinker and Frankie Sixpack want to know Jack so they are tripping over each other buying NVDA stock with both fists knowing that it will go up forever because Prophet Jensen said so. As always, never believe what human animals say; instead look at what they do in the charts.
The late 2022 top is worth a look. The red rising wedge pattern was bearish. The RSI was overbot and negatively diverged, ditto the stochastics and money flow, and the histogram is neggie d; all these indicators are bearish calling out a top. However, the MACD line was still long and strong as price made its matching or higher high. Thus, you knew NVDA is topping-out on the monthly basis and headed for sogginess for a few months but then would recover for a higher price high again.
The negative divergence spanks price lower to start 2022 and the bottom fell out in April 2022 extending the duration of the downside. Positive divergence was setting up in late 2022 but still had a ways to go; a legitimate bottom would have likely set up to begin 2023. Instead, the stock market in general begins rallying and the AI hype starts to take shape and NVDA never looks back. The AI orgy is on with Silicon Valley techies dancing on conference tables only wearing their fleece vests.
Note how the volume trails off in recent years. As price makes new highs, volume should be strong and robust but it is not which hints that conviction for more upside is not in play. If you bring up the weekly chart, you can see distribution taking place in recent months (smart money pushing shares off to the dumb money).
Currently, there are three matching price tops so the chart indicators can be assessed to see if negative divergence exists and a potential top call at hand. The RSI is clearly overbot and neggie d; bearish. In addition, the RSI is neggie d over the last 3 years. The histogram is neggie d; bearish. The stoch's are overbot and neggie d like the RSI; ditto the money flow. Folks, that is a bag of sh*t. However, the MACD line remains long and strong extended way up and past nose-bleed territory into the stratosphere. The MACD line wants to see another higher high in price after price receives a spankdown on the monthly basis.
The ADX shows that price has been in a strong trend higher for the last few years above 30, however, the current high at 59 with price making a way bigger high, is not higher than the prior high in late 2021; negative divergence. In other words, the strong trend higher in price for the current rally is not as strong as during the prior peak in price.
The Aroon green line is overbot and the red line is oversold which means the bulls are nearly entirely convinced that NVDA stock will keep going up forever. At the same time, bears are nearly completely convinced that NVDA stock will go up forever and there is no point to short it. This is a contrarian indicator that tells you the sentiment for the stock remains off the charts bullish. The bears have all left town.
There are two scenarios. The MACD (some call it the mac-dee) is at perhaps the highest level ever seen for a stock; it is special stuff. Therefore, it would not be surprising if the MACD simply reversed and started falling like a rock without warning. This would only occur this month if price started to collapse lower. This would be the purple arrow scenario where NVDA receives a multi-month spandkown beginning anytime.
Typically, the MACD line is not in the stratosphere, it may instead be at a more reasonable sub 100 number, and need to form neggie d to call the multi-month top. This is the maroon arrow scenario where NVDA will be soggy for a month but then recover for a matching or higher price high, say in late June or early July, with the MACD then going neggie d to join the other indicators, and that would be the multi-month top.
Either scenario, NVIDIA is topping-out on the monthly basis (long-term basis) anytime between now and July. Isn't it funny that all the sucka's buying NVDA believe that they will hold on to it forever and be fabulously wealthy? Or parents that buy NVDA stock for their kids believing that it is a long-term winner.
When she begins rolling over, price will seek the middle band since the upper band has been violated for the last year. The middle band is at 454 and the lower band is down at 32. No, don't worry about 32 but the 120 to 300 landing zone is a real likelihood a few years out. Do not be surprised if NVDA drops to 350-500 over the next year.
The only thing that can stop the topping process would be more AI hype. It is hard to imagine there would be more hype available in the rabbit's hat but you never know. A good news spurt in price would only serve to reset the entire discussion above again only right-translated a couple months.
Looking at the weekly chart, price is at 899 not quite up to the prior weekly high. You cannot have negative divergence until price makes a matching or higher high (price is moving up while the chart indicators are negatively diverging (sloping down)). The chart indicators are weaker than the green tea that Nurse Goodbody is serving. Benny Hill. The 950-ish level is the prior high area so that would be a go signal to short the stock (but only for speculators and gamblers). It is extra crazy to go against a ticker with such uphill power. Keystone does not own NVDA long or short currently but will likely play it short if it tags 950+.
The answers are always in the charts. The monthly chart is topping-out anytime between now and July and will begin a multi-month down move. In the mean time, do not expect any great moves higher in the stock above its prior highs. The weekly chart is trying to return to prior high levels. If a short-seller, that is ideal. If price tags 950, check out the weekly chart and if all the chart indicators remains neggie d, the top is in on the weekly basis and the stock can be shorted going forward.
When this occurs, you can see how this gels with the monthly chart to see if the multi-month top is in place, or, if, as discussed above, the downside will only be a few weeks (a month), then back up for the price to place the long-term top as the MACD on the monthly chart goes neggie d. Remember, the MACD on the monthly is at such an obscene level that it can reverse now and does not necessarily have to throw off neggie d. So you don't have to guess. Watch the weekly chart and see if price hits 950+ and you will know when to short.
If you are a long-term holder of NVIDIA and made boat loads of money, scaling-out would be a prudent approach. Sell one-third of the position now then one-third in June and the final third in July or even tighter if the monthly chart tops-out as explained. It's Your Call as the up and coming Ghost Club band from Da Burgh sings with its Springsteen influence. 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.
Note Added 5/16/24: NVDA tags the 950 with a high today at 958.19.
Note Added 5/18/24: NVDA finishes the week at 925. As she printed the matching price top at 950+, the weekly chart is in neggie d across all indicators. NVIDIA yearnings are out in the week ahead. If earnings were not on tap, NVDA has topped out on the weekly basis, and a multi-week down move has now started. Of course, if the earnings are great and everyone receives another dose of AI hype by Pastor Jensen, NVDA may want another matching price top after earnings. Two scenarios. She continues dropping now on the weekly basis and the earnings will only serve to create serious downside negativity, or, NVDA receives a good earnings report and the stock floats a bit higher favoring the 950+ again, but this will be short-lived, a few days or week or two, and then the weekly chart will remain in negative divergence so price will begin dropping and falling into a multi-week decline. If you bring up the monthly chart, price makes matching and higher highs for the last 3 months, therefore, the indicators can be assessed for potential neggie d. The RSI, stochastics and money flow are negatively diverged calling a top on the monthly chart, however, the MACD and the histogram are showing higher highs. This tells you that price wants to drop on the weekly basis but there is another high ahead on the monthly basis with NVDA. Reference the discussion above. There is 2 weeks remaining in the month so NVDA can easily fall apart in the days ahead as explained and this activity can turn down the histogram and/or MACD on the monthly chart into neggie d which would seal the top on the monthly basis. Thus, NVDA wants to start a multi-week pullback although yearnings may delay it a few days. On 5/31/24, you can look at the monthly chart to see how the MACD and histo fared and that will tell you the path forward on the monthly basis (either a multi-week decline leading into continued soggy price action for a few months or more, or, a multi-week decline that then leads into another rally for price to come back up to the highs, say in the late June/July time frame, to place the final top on the monthly basis). Keystone does not own NVDA long or short currently and would only consider the short side over the next month but only with tight mental stops because NVDA is the top momo bullish stock right now. The Uber driver and doorman said they took their entire paychecks and bot NVDA stock. The broker guy was so friendly and encouraged them to take shares (off his hands and serve as the bag-holding sucka's). Isn't trading fun? Watch out for the sharks in the water.
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