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Nvidia Presents a Buy-the-Dip Setup for Hungry Buyers

Nvidia has been on a tear lately and hasn't given bulls many buying opportunities -- until now. Let's look at the chart.

Nvidia  (NVDA) - Get Report as of late has been a dominant performer. The stock is now down for the week, though, thanks to Thursday’s fall of roughly 3%.

Coming into Thursday, the Santa Clara, Calif., chipmaker was riding a seven-week win streak, rallying in 25 of 33 sessions amid that run. The streak isn’t over, but Thursday’s dip may present an opportunity.

We went to bed on Wednesday night with everything intact. The Fed meeting minutes didn’t do much to move the markets and the indexes closed at or near the highs.

For its part, Nvidia touched an all-time high in the session, although it closed lower on the day.

Thursday morning was a different story. The indexes opened lower, about 1.5%, while Nvidia gave patient bulls a nice buying opportunity. Let’s take a look at the charts.

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Trading Nvidia Stock

Daily chart of Nvidia stock.

Daily chart of Nvidia stock.

After a massive rally like the one we’ve seen with Nvidia, traders have to be careful.

Specifically, the shares rose went from sub-$550 to almost $850 amid the current run. Further, the stock hit the 261.8% extension from its most recent range.

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Why the caution on such a big winner? Because Nvidia has rallied so far so fast, and a deeper unwind wouldn’t be surprising. That’s particularly true if we get a deeper correction in the indexes.

That said, Thursday’s dip is a buying opportunity for more aggressive traders.

Nvidia stock is testing down into the 10-day moving average for the second time in as many months.

This stock has been incredibly strong, and it’s hard not to be a buyer on this type of pullback.

On the upside, I’m looking for a gap-fill near $813. Above that opens the $825-plus area, with resistance in play between $833 and $835. 

If Nvidia stock can clear that area, it opens the $850 mark, with the 261.8% extension all the way up near $860.

As far as short-term targets go, that’s about as much as one could ask for.

On the downside, a break of Thursday’s low and a close below the 10-day moving average could put the 21-day moving average in play. 

At the risk of sounding like a broken record, the 21-day also seems like a reasonable dip-buying level should we get there.