The Negative Divergences Pile Up

NVIDIA
NVDA

DIA
, Netflix
NFLX
, Tesla
TSLA
and Apple
AAPL
now have daily price charts showing significant and telling divergences: price is going up, but the technical analysis gauge known as the “relative strength indicator” or “RSI” is going down. Often — not always, but often — this suggests a warning about the strength previously seen in the stocks.

This is just one example of a price chart look and you would be required to study it in conjunction with other factors, of course. Nonetheless, since these 4 brand name tech stocks were key players in the recent NASDAQ
NDAQ
-100 power move upward, it’s worth taking the time to examine these divergences on each chart.

NVIDIA’s daily price chart looks like this:

The red-dotted line connects the late May high with the recent July high and shows the continuation of a powerful uptrend from early 2023 to the present. Underneath the price chart, take a look at the relative strength indicator and notice how this strength measure is declining over the same time frame. The rate of change chart below that confirms the issue. There’s no reason NVIDIA can’t keep chugging higher based on this, but a measure of caution is worth consideration.

Here is the Netflix daily price chart:

The red-dotted line connects the early June high with the mid-July high and clearly shows what a strong rally can look like. The relative strength indicator, below the price chart, demonstrates a negative divergence: that is, price goes one way while RSI go another way. Just like the NVIDIA chart, this Netflix look might give the cautious investor some pause.

The Tesla daily price chart is here:

Basically, this is the same thing as the above 2 charts. The line that connects the June high with the July high is definitely upward, but the relative strength line is definitely downward. It’s bullish that the 50-day moving average has crossed above the 200-day moving average but the negative divergence between price and relative strength may suggest that, at the least, a rest is due.

The Apple daily price chart looks like this:

It’s been a powerhouse move from the early January low to the present but now a negative divergence has formed between price and RSI. Between the June high and the July high, the stock is higher and, at the same time, relative strength has moved lower.

Nothing is guaranteed with technical analysis — just like fundamental analysis, it can be misleading or just wrong. As I’ve mentioned, it’s important to consider this particular gauge along with others before reaching any definite conclusions. That the negative divergences on each of these big cap, NASDAQ-100 stocks are clearly present is one important factor to consider.