Nvidia Holds the Key to the Market’s Momentum Struggle

Nvidia (NVDA) is one of the biggest beneficiaries of the AI boom. And it became one of the globe’s most highly watched stocks.

The market-leading AI chipmaker nearly quadrupled in just 12 months. And it doubled in the first nine weeks of 2024 alone.

This became a massive driving force of the Big Tech rally.

NVDA was even on track to surpass the market cap of tech behemoth Apple (AAPL) at one point.

But NVDA peaked almost six weeks ago (March 8). And it has struggled to regain its lost momentum.

Now it is about to test key levels. So let’s check where it’s heading next…

Fluctuating Momentum

NVDA rallied from early 2023, yet it gapped higher in May 2023 after announcing a big earnings beat.

NVDA then consolidated in a sideways band from July to December. Its rally finally resumed in earnest this year.

Nvidia (NVDA)

Source: eSignal

That sideways pattern appears in the 10-day Moving Average (MA, red line) crossing back and forth across the 50-day MA (blue line).

The Relative Strength Index (RSI) also flipped between its upper and lower ranges. That showed that buying momentum was fluctuating.

Additionally, this period coincided with the blue MACD line crossing the orange Signal line multiple times in both directions. It too moved between its upper and lower range (divided by the zero line, 0.00).

Even before NVDA’s rally resumed at the start of this year, though, the chart was already showing positive signals:

1. The RSI had already crossed into its upper band. It remained there (until recently) for the rest of NVDA’s rally.

2. The 10-day MA crossed the 50-day MA back in November. It tracked above the longer-term MA before its rapid acceleration in January.

3. The MACD was above the zero line. NVDA’s sharp rally coincided with the MACD line rallying strongly and dragging the Signal line higher with it.

Take another look:

Nvidia (NVDA)

Source: eSignal

But then NVDA’s rally peaked and reversed from its all-time high (‘A’). The RSI made an inverse ‘V’ and subsequently tracked lower.

The MACD line topped out and reversed below the Signal line, dragging both lines lower.

And look at the MAs… After diverging as NVDA’s sharp rally took hold, the two MAs have been closing in on each other. And NVDA recently closed on the 50-day MA.

So, with these signals looking bearish, what should we look for next?

An Emerging Down Move

The RSI recently tested and broke below support (red circle). So I’ll be watching the action closely around here.

It’s still early days. But a sustained shift into the RSI’s lower band could set NVDA up for an emerging move down.

The MACD line leading the Signal line below the zero line would also add greater impetus to any down move.

And for a bigger fall, I’ll be watching both the MAs.

The 10-day MA crossing below the 50-day MA would confirm any down move and could soon see NVDA breaking below the $800 level.

And that would add further negative sentiment to the broader market, which is already struggling for momentum…

Regards,

Larry Benedict
Editor, Trading With Larry Benedict