Despite Nvidia’s (NASDAQ: NVDA) current short-term bearish outlook, a stock trading expert has indicated that investors should prepare for the possibility of reaching record highs, based on the equity’s technical setup and underlying fundamentals.
According to the expert, known as CyclesFan, Nvidia’s True Strength Indicator (TSI) on the weekly chart is forming a “double bottom,” which signifies an impending bullish trend. This observation was shared in an X post dated September 22. While this pattern implies that Nvidia might have hit a temporary low, the expert cautioned that the TSI has yet to register a bullish crossover. The TSI serves as a momentum indicator, helping to gauge the strength and direction of a stock’s price movement.
In the current market context, Nvidia is trading near the upper band of the Bollinger Bands (BB), indicating potential support and resistance levels for traders to monitor. The stock’s position within the upper band reflects a period of heightened price volatility, although it has not yet surpassed the upper band’s resistance, suggesting that any upward movement might be short-lived.
NVDA stock price analysis. Source: Investing.com
CyclesFan predicts that Nvidia will likely encounter fluctuations in the upcoming weeks until a bullish signal emerges. Looking ahead, they believe that Nvidia will not reach a new all-time high before its earnings report in late November. The stock’s next significant upward movement is expected to hinge on its earnings performance, necessitating patience from investors for a clearer indication of the stock’s trajectory.
“A bullish crossover will confirm that it made an intermediate-term low in August. A new all-time high will not happen before its next earnings in late November,” CyclesFan noted.
### Implications of Nvidia’s Earnings Report
Nvidia is anticipating a boost in revenue for the third quarter of 2024, driven by ongoing demand for its artificial intelligence chips. The tech giant is projecting a Q3 gross margin of 75% and expects revenues to reach approximately $32.5 billion, aligning with market expectations.
Typically, strong earnings can serve as a catalyst for stock rallies; however, this was not the case for Nvidia following its Q2 report. The company reported an impressive year-over-year revenue increase of 122%, totaling $30.04 billion. Nonetheless, the stock reacted unfavorably, declining nearly 6% and struggling to break past the $120 resistance level.
Nvidia is currently experiencing short-term volatility, failing to capitalize on a recent market upswing spurred by the Federal Reserve’s interest rate cut. The stock appears to have stalled, raising questions about whether NVDA has lost the momentum it had gained in recent months, particularly due to its advances in the AI sector.
### Long-Term Outlook for NVDA
Adding to the conversation, another analyst known as Market Maestro, in a post on September 22, recognized that the current correction phase is marked by a triple-top pattern and a significant negative divergence in the relative strength index (RSI). They pointed out that after reaching the Fibonacci 78% retracement level at $129, the stock exhibited weakening strength, prompting concerns about potential short-term declines. However, the long-term bullish outlook for Nvidia remains unaltered. The analyst anticipates a rebound toward $150 after the stock retests what they refer to as a ‘buy zone’ at the 12-week exponential moving average, located around $92.
NVDA stock price analysis. Source: TradingView
Meanwhile, concerns persist among Nvidia skeptics regarding the sustainability of the company’s dominance in the AI landscape, especially with new competitors entering the field. Citi (NYSE: C) analysts cautioned that Nvidia’s winning streak in AI might wane, using the stock’s decline following the recent earnings report as a warning. Analyst Atik Malik suggested that Nvidia could be overtaken by Apple as the leading AI stock, especially with features like Apple Intelligence being integrated into its devices.
A review of Nvidia’s stock performance indicates that it closed the latest trading session at $116, marking a decline of approximately 1.5% for the day. The short-term bearish trend is evident in the stock’s monthly chart, with NVDA down over 10%.
NVDA stock price chart. Source: Finbold
In summary, while Nvidia grapples with short-term volatility, analysts remain divided on its immediate prospects. As the company approaches its next earnings report, investors should remain vigilant for clearer signals that could indicate whether the stock will regain its upward momentum or face further downward pressure.
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