The stock quickly rebounded north of $200, rallying toward $220 a share at the start of November. We actually wrote a technical how-to piece on Nvidia, cautioning investors to be leery of the stock right as it neared this key resistance mark. Now back below $200 and down about 7% Monday, shares may warrant a closer look ahead of earnings.
Nvidia is set to report its fiscal third-quarter results on Thursday after the close, and it's a report that many investors will have an eye on.
It's been a shocking fall for one of Wall Street's darlings. After the company's last quarterly report, investors were undecided at first, but then pushed it to new all-time highs just above $290. Down about $100 now, shares have been shaved by a third, to around $190, making many investors timid on Nvidia.
The truth is, many semiconductor stocks are struggling right now. Margins and revenue are under pressure and while the valuation for many of these stocks are attractive, the price action is not.
Nvidia is a bit different than your average semiconductor company, though. It's top-of-the-line products should help insulate the company's business vs. the cyclical nature that many lower quality, commoditized businesses suffer from. These high-end products are used in a range of secular growth industries like gaming, datacenter, autonomous cars and artificial intelligence.
What Nvidia's going to do this quarter or next is hard to predict, but what it will do over the next two to five years is not. The company is a pillar in the A.I. movement, and unless video games are going out of style and Amazon (AMZN - Get Report) , Alphabet (GOOGL - Get Report) (GOOG - Get Report) and Facebook (FB - Get Report) are suddenly going to stop collecting user data -- they won't -- then Nvidia should be just fine.
But what do the charts say?
Trading Nvidia Stock
With Monday's dramatic beating, Nvidia stock is back below its steep short-term downtrend resistance line (blue line). It also failed right at $220, which was no surprise to readers of TheStreet. Now we need to see if Nvidia can find support at $185, a level that held in October 2018 and December 2017. If it fails, the panic lows from last month near $176 are likely on deck. On the upside, look to see how Nvidia handles its 21-day moving average and the $220 level.
The question becomes two-fold when dealing with the chart: Will Nvidia get back to its lows and if so, will it happen before or after earnings?
Down more than 33%, it seems like the worst would be priced into Nvidia, although we can't make that assumption in a climate such as this. While not cheap necessarily, I wouldn't argue that Nvidia stock is nauseatingly expensive, as this blue-chip tech leader trades at 26 times this year's earnings. While it may take a while for long-term investors to reap significant returns, they can do well in a name like Nvidia by dipping their toe in the water.
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