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Nvidia (NVDA) is the third largest constituent of the S & P 500, and it has an exceptionally strong influence on investor sentiment. The company is at the heart of the artificial intelligence “trade” which has been a bullish theme for the market over the past two years. After a booming start to the year, Nvidia is going to finish the third-quarter in the red for the period. With the stock having stalled within its steep long-term uptrend, investors are reasonably wondering if NVDA is signaling an end to the AI trade. Looking at NVDA from a long-term technical perspective, there are indeed some indications that the consolidation phase that began in July will keep hold. For one, the DeMARK Indicators logged a counter-trend signal in July denoted by the red arrow on the monthly bar chart. The monthly stochastic oscillator has since fallen below 80%, a long-term overbought indication, and the monthly MACD histogram has downticked. Taken together, these signals suggest that NVDA could remain range-bound for another several months. NVDA’s consolidation phase has taken the shape of a triangle pattern, evident on the daily bar chart. The boundaries of the triangle converge to capture lower highs and higher lows, reflecting a fickle period for the stock that often comes with indecisiveness. It is possible that investors are not convinced the AI trade warrants another big upmove from NVDA, which was up about 150% in the first half of the year. As we close out the month of September, the stock is down about 3% for the quarter. The boundaries of the triangle on NVDA’s chart bear watching in the near term, with resistance at its upper boundary near $126, and support from its lower boundary near $107. There is a new downturn in the daily stochastics that supports a pullback from resistance, preserving the triangle formation. If support is broken, we would expect risk to increase to the downside, as is often the case with triangle breakdowns, noting secondary support is near $97. This warrants risk management below $107. With NVDA’s big footprint in the S & P 500, it is an important stock to watch, even without a position. The sentiment would likely improve for NVDA, and therein the S & P 500, if it manages to lift out of its triangle formation despite indications to the contrary. We would always be respectful of breakouts (and breakdowns), and a triangle breakout would support a retest of NVDA’s all-time high near $141, possibly staving off the end of the AI trade. —Katie Stockton with Will Tamplin Access research from Fairlead Strategies for free here . 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https://www.cnbc.com/2024/09/30/levels-to-watch-on-the-nvidia-chart-from-katie-stockton-after-a-poor-third-quarter-for-ai-leader.html
