Nvidia shares snap years-long streak above key uptrend tracker


Nvidia Corp.’s stock chart now shows that the stunning uptrend investors in the semiconductor maker have enjoyed this year amid all the artificial-intelligence hype may have ended.

But as history suggests, after a long uptrend, rather than a new downtrend, investors may have to endure some whipsaw action within a relatively static trading range over the next several months before the uptrend resumes.

The stock NVDA, -0.42% slumped 4.7% on Wednesday to close at $425.54, which was 10.4% below the July 18 record close of $474.94, following a downbeat earnings report from Super Micro Computer Inc. SMCI, +4.01%, which counts Nvidia as a key supplier.

Many on Wall Street believe a correction is defined by a decline of at least 10% to up to 20% from a significant recent peak. A drop of 20% or more is thought of as a bear market.

But perhaps more important for chart followers, the stock closed below the widely followed 50-day moving average for the first time since Jan. 6, 2023. The 50-DMA had extended to $429.03 on Wednesday.

FactSet, MarketWatch

On Thursday, the stock bounced 0.5% in morning trading but held below the 50-DMA, which extended to $429.68, according to FactSet. Despite the recent correction, the stock was still up 192.6% year to date, while the PHLX Semiconductor Index SOX has climbed 43.7% and the S&P 500 SPX has advanced 17.2%.

Read: Nvidia is ‘domination’ and could unlock $300 billion in AI revenue by 2027, analyst says.

The 50-DMA is used by many chart watchers as a short-term trend tracker. If the stock is above that line, it is viewed as being in an uptrend. The most time spent above that line, the stronger the uptrend.

Until Wednesday, Nvidia’s stock closed above the 50-DMA for 146 consecutive trading sessions, according to FactSet data, which is the second-longest stretch since it went public in January 1999.

The record stretch above the 50-DMA was 255 sessions, a streak that ended on Feb. 23, 2017, while the second-longest stretch of 143 sessions ended on Oct. 28, 2020.

After the stock snapped the super-50-DMA streak in 2020, it waffled around the line and was little changed for the next several months before resuming the uptrend with a big spike.

As an uptrend takes a several-month pause after the 50-DMA breaks, the 200-DMA becomes strong support.

FactSet, MarketWatch

As the chart above shows, after the 50-DMA broke, investors set their sights on the 200-DMA, which many view as a dividing line between longer-term uptrends and downtrends. In this case, despite a one-day dip below the 200-DMA in mid-March 2021, the line acted as strong support.

And after the record super-50-DMA streak, the stock seesawed around the line, while having a slightly negative bias for the next few months, before the uptrend resumed in force.

After the 50-DMA break, the 200-DMA was never threatened.

FactSet, MarketWatch

This time, the stock never really threatened the 200-DMA.

In the current technical situation, one of the downside levels to keep an eye on is the bear-market threshold of 20% below the July closing high, which comes in at $379.95. Another level to watch is the 200-DMA, which currently extends to $269.63 and has been rising by $1.65 a day over the past 10 days.

This article was originally published by Marketwatch.com. Read the original article here.

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