Who is ready for some advanced Charting 401? NVDA is the poster child of the big US stock market rally this year. Just like bitcoin and blockchain, when those words became part of the American lexicon, stock prices jumped higher if you included those words in your quarterly report. The latest favorite flavor on Wall Street is AI; Artificial Intelligence. Mention AI in your earnings call and an orgy of buy programs will hit the tape for that ticker creating fantastic stock market gains for the wealthy class.
We are in June and there are only 6 trading days remaining in the month (EOM), quarter (EOQ2) and the first-half of the year (EOH1). The extension in NVDA this month is in part due to window dressing where every corrupt Wall Street manager needs to show the NVDA ticker in their quarterly reports so the upper middle class sycophants, that service the wealthy elite, that own stocks, can brag to coworkers at the water cooler that they own NVIDIA.
Let's start with the spaghetti on the daily chart. The red rising wedge pattern is bearish. Price prints another new high yesterday jumping +3.8% in early trading, but then fell on its sword ending the session down -3.5% losing over -7% intraday. The candlestick prints a key outside reversal day which is a negative indicator going forward. Typically, with outside reversals, the weakness comes, but not right away, usually a few days or couple-three weeks pass before the real downside starts to kick-in.
Back in early March an outside reversal day was printed. Sogginess followed for a few days but you see price came back up for a matching high in late March, then it was all downside after that. The same fractal may occur this time around.
So price prints the higher high yesterday, and following the thin black line downward you see that all the chart indicators are sloping down with negative divergence (the indicators are negatively diverging away from the rising prices; the ticker is out of gas). That is an easy top call for the daily time frame so a few days of weakness is expected ahead.
The ADX continues showing a strong trend higher for NVDA (pink box) although less so than the prior strong trend higher from late January to early April. The ADX lags all other indicators so it would likely be last to roll over as prices drop. NVDA would not be in serious trouble until it lost the 28-30 level since that would indicate that the strong trend higher in the daily time frame is officially over.
The Aroon is fantastic. The green line shows 100% of the bulls believe NVDA stock will go up forever and the red line shows that 100% of the bears also believe NVDA stock will go up forever. That's funny. It is called over the top excessive bullish euphoria. Everyone is on one side of the boat, drunk as skunks, buying NVDA with every spare coin in their pocket. They brag that in a couple years they will be millionaires.
The blue circles show the distribution days occurring since April. Humorously, the ladies can interpret the April distribution days as a Rorschach test. Benny Hill. Anyhoo, you clearly see the smart money passing off shares to the dumb money in April as prices stalled. Even as NVDA rallied again, the smart money keeps distributing stock to Joe Sixpack, Jane Winedrinker and Carlos Bagholder.
The upper band is violated on the daily chart so the middle band, that is also the 20-day MA, at 119, and rising, is on the table as well as the lower band at 98 and rising sharply. Price is extended above the moving average ribbon so a mean reversion lower is needed.
On the NVDA weekly chart, a lot of the same technical analysis is at play. The red rising wedge, negative divergence developing, upper band violation, price extension, overbot conditions, all bearish indications.
Note, however, that the chart indicators are neggie d except for MACD line and histogram. They want price to come back up for another matching or higher high after the other indicators create sogginess. The negatively-diverged indicators on the weekly chart conspire with the universal neggie d on the daily chart to push the stock lower in the daily time frame. After a few days or week or so of sogginess, price will want to come back up again for another high because the MACD still has gas in the tank.
That said, there is a special circumstance. The universal neggie d on the weekly chart will begin a multi-week downslide but due to this being an out of control momentum stock, this downside now initiated by the universal neggie d on the daily and partial neggie d on the weekly, may be the top. The MACD may begin falling from its greatly elevated level and not place neggie d. Thus, a multi-week downslide is on the come for NVDA but you have to keep watching the weekly chart develop to see if the top is now or say, in a couple weeks.
The ADX on the weekly chart remains in a strong upside trend as per the pink box for the last 15 months, however, the red line shows that the strength of the trend is waning. The Aroon is comical like the daily chart. There are no bears on NVDA. Everyone is bullish including the doorman, taxi cab driver, Uber driver, shoeshine boy and even the computer programmer that is about to lose his job going forward.
The volume candles show a big distribution week in April where the smart money was starting to bow out and hand their shares over to the dumb money that will hold the bag, but the earnings release catapulted the stock higher yet again. Note that the joyous bullish buying was stronger before April than now.
Price is extended above the moving average ribbon so a mean reversion lower is needed on the weekly chart. The upper band is violated so the middle band, that is also the 20-wk MA at 94, and rising, is on the table as well as the lower band at 60.
The thin orange lines show the 2-leg bull flag patterns at play. First, there is the move from 11 to 50, that is 39 points, then the sideways consolidation with a downward bias, the flag, or pennant if you prefer, then the second leg begins at 40 so the upside target is 79 and was easily attained. Another bull flag runs from 40 to 95, that is 55 points, and then consolidation and the second leg begins at 75 so 130 is the upside target. Bingo, that is achieved satisfying the pattern. That pattern can also be looked at as gong from 50 to 95, that is 45 diff, so the target was 120 also achieved.
So what does all that fancy mumbo-jumbo mean? NVDA should drop for a few days forward but then return for another matching high about 1 to 2 weeks out. At that time, the MACD will likely go neggie d and the top can be called on the weekly basis. NVIDIA will then begin the multi-week slide lower. The other scenario would be for price to head lower now and folks begin panicking which will kick-in the multi-week downslide faster.
Keystone does not hold NVDA long or short currently. If it is played going forward it would be on the short side. The only thing that can save it is more hype from Jensen at NVIDIA or from tech analysts, or news that further boosts the overall AI hype. Barring that, it is time to get ready for the multi-week slide lower. Right now, Jensen is in the back room spray painting a small cardboard box black; he plans to hold it in the air and tell everyone it is the newest AI chip available. People are stupid; they will buy into it. Stupid Girl. 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 Saturday, 6/22/24: NVDA continues lower for a second day to 126 receiving the spankdown from the neggie d on the daily chart. The weekly chart shows the long and strong MACD line while all the other chart indicators, including the histo, are in neggie d (topped-out). Thus, NVDA may need a jog move to get the MACD to go neggie d (down for a few days or week, then up for a few days or week for a matching or higher price high while all the chart indicators, including the MACD are neggie d, so you can call the top in NVIDIA on the weekly basis, and a multi-week down move will begin in earnest (or may be underway already if the sentiment turns negative fast). Quick, Jensen needs a new prop to keep the AI hype alive. He is spray painting a small cardboard Amazon delivery box black in the parking lot out back, and plans to call it the new AI chip. Got to keep the party going.
Note Added Tuesday Morning, 6/25/24, at 7:45 AM EST: NVDA soils the sheets for 3 days dropping from the 140.76 peak to 118.11 a -16% mini-crash. A -10% pullback is a correction and a -20% drop is considered a bear market. NVDA is recovering in the pre-market to 120.85 trying to steady the ship. NVIDIA wipes out $430 billion, a half a trillion, in market cap during the 3-day beating. NVDA had gained $2 trillion over the last year so what's a half-bill among friends? Jensen and other executives are selling stock (insider trading) which causes uneasiness and more selling but of course they hide behind the loin cloth of saying the sales were pre-scheduled. Why do they need to sell any stock if they think the sky is the limit going forward for NVIDIA? Oh, probably because they do not think the sky is the limit and they are the ones turning the knobs, er joy-sticks, and pulling the levers. Someone needs to spike the NVDA punchbowl to restart the party. Where's Jensen? Hey, buddy, wave that black cardboard box in the air so people will buy the stock. This is what America's faux free market crony capitalism system has become; a caricature of itself.
Note Added Wednesday Morning, 7/24/24, at 5:10 AM EST: NVDA 122.59. The multi-week downside should begin in earnest at any time forward. The NVDA monthly chart is overbot and in neggie d except for the MACD and histogram. The expectation is for a multi-month move lower for NVIDIA and then it will recover all the way back up again, say in late August or September, for a significant multi-month top. NVDA remains a hot stock with traders willing to buy any dip with both fists. NVDA has held the 118-122 support for almost 2 months so obviously, if it gave way, there will be Hell to pay.
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