Advanced Micro Devices (AMD) - Get Advanced Micro Devices, Inc. Report is surging to new highs, while Intel (INTC) - Get Intel Corporation (INTC) Report made an excellent post-earnings move to the upside last month. Is it now Nvidia's turn to make a powerful rally after it reports earnings after the close on Thursday?
Nvidia went public two decades ago but really burst onto the scene in 2016 when shares exploded from a low of $24 to a high of $118. It didn't stop there though, almost doubling again in 2017 and topping out over $290 in 2018.
As readers know all too well now, that meteoric rise didn't end well for Nvidia. Part of the company's booming growth was a result of cryptocurrency-fueled demand, which dried up once bitcoin prices fell.
When combined with an already dreadful fourth quarter for U.S. equities, Nvidia shares fell more than 50% in the fourth quarter of 2018. Thankfully for readers of TheStreet, they we were warned ahead of time to get out of Nvidia by none other than Jim Cramer.
Do we finally have the all-clear for Nvidia stock? Let's take a closer look at the chart.
Trading Nvidia Stock
Above is a five-quarter look at the daily chart for Nvidia stock. This highlights its fall from $291 in October 2018 to just $124 in December. From peak to trough, NVDA stock has been able to reclaim about 50% of the decline over the past 11 months.
Specifically, the 50% retracement comes into play at $207.81, which Nvidia is holding above ahead of earnings. It's also forming a rising wedge pattern, highlighted by the blue lines on the chart above.
So what's the play?
As much as I'd love to see the 50% retracement and the 20-day moving average near $203 hold as support, they are unrealistic downside targets ahead of an event that usually results in a move larger than 2%. In regards to downside targets, $190 is a very key area in my view.
Not only does the 50-day moving average come into play near this mark, but it has been a significant level over the past year. More so, the 61.8% retracement for the five-quarter range comes into play at $188. The prior 2019 highs until this month were near $193.
In other words, you can see how important the $188 to $193 area is, and why holding ~$190 would be a positive for bulls.
On the upside, there are areas of interests as well. At $220, Nvidia would be running into resistance from October and November 2018, while clearing a resistance trend line (blue line) near $215. Traders will need to see if the stock can clear either of these levels on a post-earnings advance.
Above $220 puts $227 in play. That would fill the October gap from last year, while putting the 38.2% retracement in play at $227.57. However, to get here would require a move of almost 10%, which may be asking a lot for bulls.
The bottom line: Bulls need to hold $190 on a pullback. On the upside, watch $220, followed by $227.
This article is commentary by an independent contributor. At the time of publication, the author had no positions in the stocks mentioned.