Nvidia Corp. (NVDA) has been a popular choice among investors due to its involvement in the artificial intelligence (A.I.) industry, leading to high valuations in the first half of 2024. However, recent trends in the stock market suggest a shift away from mega cap growth stocks like Nvidia. The short-term chart of NVDA reveals bearish engulfing patterns in mid-June and mid-July, indicating a potential reversal in sentiment among traders. These patterns occurred around the $140 price range, where strength was met with selling pressure. Additionally, the failure to surpass the previous high in July around $135 suggests a possible stall in the long-term uptrend.
As Nvidia hovers around $120, it is testing the most recent swing low from mid-June. This level coincides with a 38.2% Fibonacci retracement of the April to June rally and the 50-day moving average, indicating strong support. However, a break below $120 would signify a new swing low and a breach of key support levels. In such a scenario, the next downside target for NVDA could be around $100, representing a significant retracement of nearly 30% from the June peak. This level aligns with the 61.8% retracement level and the 200-day moving average, further reinforcing its significance.
A decline in Nvidia’s stock price to $100 could have broader implications for the S&P 500 and Nasdaq 100 indexes, given Nvidia’s weight in these benchmarks. The negative impact of a 30% downturn in NVDA on these indexes highlights the interconnectedness of individual stock movements and overall market performance. Investors should closely monitor Nvidia’s price action as it may signal broader market trends.
While a break below $120 could lead to further downside for Nvidia, a successful retest of current levels followed by a breakout above the June and July highs could signal a bullish reversal. If Nvidia manages to establish a higher low and surpass key resistance levels, there may be significant upside potential for the stock. However, the overall cautious tone of the charts suggests a more conservative approach going into August, emphasizing the importance of closely monitoring technical indicators and key support levels.
Nvidia’s stock faces downside risks as it tests critical support levels, with potential targets of $100 in the event of a breakdown. Investors should consider the implications of Nvidia’s stock movements on broader market indexes and adopt a cautious approach based on technical analysis. The interplay between individual stock dynamics and market trends underscores the need for a comprehensive evaluation of risk factors and potential opportunities in the current market environment.