Nvidia
stock had a rip-roaring first half of 2023—and then not much of anything. And it seems the longer shares trade sideways, the longer the tension builds. Will it break upward to record high or downward and give back some of 2023 massive gains? We emailed three of our favorite market technicians to see what they thought of the question, and all three were solidly bullish.
Few stocks have had better years than Nvidia, which has risen 237% in 2023, driven by the demand for AI chips spurred by the launch of ChatGPT. The demand was real and profits are expected to grow faster than the stock—Nvidia’s earnings are expected to hit $12.26 in fiscal 2024, up 257% from $3.43 in fiscal 2023. Those profits mean that the stock has actually become cheaper, at 24.7 times 12-month forward earnings, that it was at the start of the year, when it fetched 34.4 times.
Still, most of Nvidia’s gains came during the first seven months of the year—the stock was up 220% through the end of July—and just 5.2% since then, despite two strong earnings reports that failed to lift the stock above $505. The sideways trading since the beginning of August raises the question of what investors might be missing.
Maybe nothing, if the technicians are to be believed. Market technician. remember, aren’t commenting on the fundamentals of Nvidia’s business, which seems strong, or its valuation, which seems reasonable if you believe the estimates. They look at the charts, at how the stock is behaving, with the belief that the market will pick up on concerns or optimism long before the reason is known.
CappThesis Founder Frank Cappelleri, who offered the most detailed assessment, pointed to two bullish patterns that might be forming. The first is a “cup-and-handle formation,” with the cup created by the stock’s rise to just over $505 in November, its decline down to $442, and then a bounce back to nearly $505, and then handle by its dip to $480 and change on Dec. 20, before bouncing back. “A breakout through 505 would create a measured move price target near 560,” Cappelleri wrote in an email, up 14% from a recent $491.80. A meaningful new high, though, would “put the stock above a much longer and larger trading range” he explains, and put it on track to hit $615, up 25%.
MRA’s John Kolovos also calls Nvidia’s chart “long-term bullish despite being rangebound for the past six months.” He notes that there is resistance near $500, but that shouldn’t be a problem as long as support as $450 holds. If the stock can break out, he sees it targeting $645, up 32%.
22V’s John Roque was far less specific, but also had encouraging words, noting that with Nvidia stock trading above an upward-sloping 200-day moving average, “any concerns…seem unwarranted.”
And we’ll stick with that view—until the charts pick up something we haven’t.
Write to Ben Levisohn at [email protected]
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