Nvidia Corp (NVDA) - Get NVIDIA Corporation Report had been one of the strongest momentum stocks since February 2016 but the stock crashed since setting its all-time intraday high of $292.76 on Oct. 2. The stock is now in a buy zone between my weekly value level of $143.86 and my monthly risky level at $156.41.
The stock closed Tuesday at $151.17, up 13.2% so far in 2019 and up 21.5% since setting its Dec. 26 low of $124.46. This bull market action compares with the bear market decline of 48.4% from its all-time intraday high of $292.76 set on Oct. 2. What's important for the bulls is that Dec. 26 was a "key reversal" where the close of $133.10 was above the Dec. 24 high of $129.98.
Demand for semiconductors is an important economic indicator as almost every electronic product we buy contains computer chips - from our smallest handheld devices to the automobiles we drive. Nvidia provides gaming applications, operates data centers, provides chips for automotive applications and operates as original equipment manufacturing using the company's powerful intellectual property.
Analysts expect Nvidia to report earnings between 74 cents and 79 cents a share when they report after the closing bell on Feb. 14. Bernstein is ignoring the turnaround by downgrading the stock to market-perform from out-perform lowering their price target to $170 from $250. This seems meaningless with the stock trading at $151.17. On the other side of the coin, Oppenheimer reiterated their outperform rating with a $190 price target. Nvidia had a 13-quarter winning streak on beating earnings-per-share estimates but that ended on Nov. 15 as the stock was already crashing.
The Daily Chart for Nvidia
Courtesy of MetaStock Xenith
The daily chart shows that Nvidia suffered a "death cross" on Nov. 13 just before the negative reaction to earnings released on Nov. 15. A "death cross" occurs when the 50-day simple moving average falls below the 200-day simple moving average and indicates that lower prices lie ahead. The stock declined into Dec. 26 when the stock traded as low as $124.46. Dec. 26 was a daily "key reversal" as the Dec. 26 close of $133.10 was above the Dec. 24 high of $129.97. The close of $133.50 on Dec. 31 was the input to my proprietary analytics and set three horizontal lines on the chart. My annual value level is $131.80 with my semiannual and quarterly risky levels at $213.01 and $258.21, respectively. Investors could have bought the stock at my annual value level at $131.80 as 2019 began and again between Jan. 28 and Jan. 30. The Jan. 31 close of $143.75 resulted in my monthly risky level at $156.41. My weekly value level is $143.86.
The Weekly Chart for Nvidia
Courtesy of MetaStock Xenith
The weekly chart for Nvidia will be upgraded to positive given a close on Friday, Feb. 15 above its five-week modified moving average of $152.50. The stock has been above its 200-week simple moving average or "reversion to the mean" at $123.07 which is a buy level. The 12x3x3 weekly slow stochastic reading is projected to rise to 32.56 this week up from 28.01 on Feb. 8. As 2019 began the stochastic reading was 8.01 below 10.00 which is my alert that the stock is "too cheap to ignore".
Trading Strategy: Buy weakness to my weekly and annual value levels at $143.86 and $131.80, respectively, and reduce holdings on strength to my semiannual and quarterly risky levels at $213.01 and $258.21, respectively. A pop above my monthly risky level at $156.41 is the key to upside momentum.
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Disclosure: The author has no positions in any stocks mentioned and no plans to initiate any positions within the next 72 hours.