Chipmaker Nvidia (NVDA) was one of the biggest beneficiaries of last year’s AI rally.
It hovered around a low $140 in early January 2023.
Then a combination of impressive earnings beats and massive investor demand for AI-related stocks pushed NVDA above $500 by late August. And NVDA’s market cap soared beyond $1.2 trillion.
But after hitting that August high, NVDA’s rally stalled.
Even another big earnings beat in November failed to give NVDA any traction above the $500 level. It just consolidated sideways.
Yet now NVDA looks to be setting itself for another move.
So let’s see how things could pan out from here…
A Clear Trend Change
You can see in the chart below how NVDA rallied right from the start of last year.
By May, NVDA’s stock price had doubled since January. NVDA then gapped higher due to its Q1 2023 earnings beat and bullish demand forecast.
That jump saw NVDA beat its previous November 2021 high.
Nvidia (NVDA)
Source: e-Signal
The chart shows classic bullish signals throughout NVDA’s uptrend.
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Buying momentum remained strong. The Relative Strength Index (RSI) stayed in the upper half of its band (above the green line).
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The 10-day moving average (MA, red line) crossed above the longer-term 50-day MA (blue line) in January. Both MAs bullishly rose.
But in August you can see a distinct change in trend.
NVDA topped out in August after its Q2 earnings. And the stock transitioned into a sideways trend. That’s shown by the 50-day MA turning flat.
Yet the 10-day MA crossed the 50-day MA multiple times in both directions – a common rangebound pattern.
This rangebound period coincided with the RSI flicking back and forth between the upper and lower parts of its range.
Then NVDA topped out in November after its Q3 earnings. And the RSI’s down move petered out around support (green line).
From there, NVDA tried to rally but couldn’t break up through short-term resistance (orange line).
Take another look:
Nvidia (NVDA)
Source: e-Signal
Yet the RSI recently retested and held support (orange circle). So the chart is telling us that NVDA could be setting itself for another run.
What am I looking for next?
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An Emerging Up Move
For NVDA to rally from here, we’ll first need to see the RSI remain in the upper half of its range. The longer it can remain in this range, the stronger any potential rally could be.
The next test for NVDA’s rally will be for the stock to break out and gain traction above short-term resistance.
Plus, I’ll be watching our two MAs…
As you can see, the 10-day MA has recently been bullishly moving above the 50-day MA while the 50-day MA gradually grinds higher.
If the 10-day MA accelerates above the 50-day MA, then that will further confirm any emerging up move.
Regards,
Larry Benedict
Editor, Trading With Larry Benedict
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