Shares rose nearly 16% last week
Key points
-
Nvidia stock will likely remain on watchlists on Monday after the artificial intelligence investor favorite surged last week as investors took advantage of a recent drop in the stock.
-
Shares have rallied towards the upper trendline of a descending channel, although the move has occurred on lackluster volume, indicating a lack of institutional activity.
-
Investors should keep an eye on key overall price levels on Nvidia’s chart at $126, $136, and $166, while watching for important lower price levels at $97 and $75.
Nvidia (NVDA) will likely remain on watchlists on Monday after the artificial intelligence (AI) darling surged last week as investors took advantage of a recent drop in stocks following favorable comments from Wall Street pointing to continued growth opportunities amid insatiable demand for AI infrastructure.
Last week, the AI chipmaker’s shares gained nearly 16% after falling about 23% between late August and early September as investor optimism toward AI cooled in the wake of the company announcing slowing quarterly growth, despite beating analysts’ earnings and sales expectations. However, market sentiment received a boost recently after Bernstein analysts called Nvidia “the best way to play AI,” while Bank of America analysts noted earlier this month that the recent pullback provides an “enhanced buying opportunity.”
Below, we’ll take a deeper look at Nvidia’s chart and use technical analysis to identify important price levels to watch following the stock’s recent swings.
Shares are trading within the descending channel
Since hitting an all-time high in late June, Nvidia shares have been trading inside a descending channel, a chart pattern consisting of two parallel downward-sloping trend lines that indicate a bearish bias in the stock.
More recently, the price has moved towards the upper trendline of the channel, reclaiming the 50-day moving average (MA) in the process.
However, just like in August, the stock’s latest advance came on lackluster volume, indicating a lack of participation from institutional investors. The stock gained 15.8% last week and closed Friday at $119.10.
General price levels to monitor
The first key area to watch on the chart is around $126, where the stock may find resistance near the upper trendline of the descending channel. It is also worth keeping an eye on rising trading volumes at this level, which may indicate an imminent break above the pattern.
If a breakout occurs, investors should pay attention to the $136 region, a location where sellers can take profits near the stock’s record close on June 18, which also corresponds closely to the mid-July high.
To predict a price target above Nvidia’s all-time high (ATH), we can use the measurement principle. To do so, we calculate the distance between the two trendlines of the descending channel and add that amount to the upper trendline of the pattern. For example, we add $40 to $126, which predicts a bullish price target of $166.
Lower price levels to consider
If Nvidia shares turn down from current levels, investors should keep an eye on the $97 region, an area where the stock could find support near a horizontal line connecting the twin March peaks with a series of comparable trading levels positioned around last month’s low.
Further selling could lead to a break below the channel’s lower trendline and the 200-day MA that could see the stock revisit the $75 area, a location on the chart that would likely attract bargain hunters near the mid-February peak and April low.
The comments, opinions and analysis expressed on Investopedia are for informational purposes only. Please read our disclaimer and warranty for more information.
At the time of writing this article, the author does not own any of the aforementioned securities.
Read the original article on Investopedia.