Is Nvidia Set for a Massive Breakout?

Nvidia has been consolidating for months now, boring traders in the process. Is the chip giant finally waking up?
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Shares of Nvidia  (NVDA) - Get Report have frustrated bullish traders for months now. That is until this week’s powerful move.

The stock burst higher by more than 6% on Monday on news of a continued chip shortage. Shares were down less than 1% on Tuesday as bulls maintain a bulk of the gains.

Trading in this name has been difficult, full of false breakouts and breakdowns as Nvidia has been consolidating its large gains. Advanced Micro Devices  (AMD) - Get Report has had similar action.

For traders, this is frustrating. For investors, a large rally followed by sideways price action is essentially the best outcome they could have hoped for. Eventually though, they too want to see a breakout to the upside.

With earnings due up later this month, are we on the verge of more gains?

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Trading Nvidia

Daily chart of Nvidia stock.

Daily chart of Nvidia stock.

Nvidia finally broke out to new highs in February 2020, only to see the stock market roll over just a few days later. But amid that abrupt decline, notice how well Nvidia held up, virtually halting its decline at the 200-day moving average.

It went on a tear after that, rallying from sub-$200 to almost $600 in September.

After a sharp correction, we’ve seen the stock go nowhere for the last five months as it chops sideways.

Monday’s rally over $560 put the stock over last month’s high. There is a level of downtrend resistance potentially in play (blue line), but I’m not ready to put a lot of weight in this mark.

Instead, I am keeping my eye on the $590 level and the $560 level — the latter of which was the monthly-up trigger.

To lose $560 puts Nvidia back in the chop zone, potentially putting $500 back in play but most likely leaving it there to trade between $520 and $550.

If it can clear $590 — which was the high in September and resistance in November — then perhaps we can get a much larger move to the upside.

Specifically, if Nvidia clears $600, investors may begin looking as high as the $660s for a potential upside target. In that area, the stock will find the 161.8% extension from the recent range.

Perhaps the stock finds momentum ahead of earnings. Maybe it will require a blowout report to send it higher. Either way, let’s keep an eye on $590 as our tell.