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Nvidia Is a Top Pick for 2020 - Here’s How to Trade the Maker of Graphic Chips

Nvidia has been on a tear and many think that can continue in 2020. Let's look at the charts for the maker of graphic chips.

Nvidia  (NVDA) - Get NVIDIA Corporation Report shares on Friday hit 52-week highs - and then eased off those levels.

The pullback came as the market digested a weaker-than-expected jobs report and as many tech stocks have had a huge run lately.

The Santa Clara, Calif., graphics-chip specialist is no exception to the latter observation; it actually has been one of the leaders in the surge. 

Advanced Micro Devices  (AMD) - Get Advanced Micro Devices, Inc. Report, Qualcomm  (QCOM) - Get Qualcomm Inc Report, Micron  (MU) - Get Micron Technology, Inc. Report and Intel  (INTC) - Get Intel Corporation Report are also among the recent winners.

But none of them were quite fitting for Bank of America’s top large-cap semiconductor pick. Instead, that went to Nvidia, as analysts slapped a $300 price target on the stock.

With receding trade-war worries, expectations for rising orders and hopes that Nvidia will close its deal to buy Mellanox  (MLNX) - Get Mellanox Technologies, Ltd. Report, Nvidia is positioning for a strong 2020. Let’s look at the charts.

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Trading Nvidia Stock

weekly chart of Nvidia stock.

weekly chart of Nvidia stock.

Above is a weekly look at Nvidia stock, which shows both the highs and lows that long-term investors have endured. 

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Some investors bought and held from 2017 or before and registered a quadrupling or more coming into fourth-quarter 2018. Remember, though, that those same investors had to sit through losses of more than 55% in just a few months.

Last year was better to Nvidia. Throughout the year, the stock put in a series of higher lows but continually found resistance at $190. 

Rather than plunging in October 2019 as it did in the prior year, Nvidia stock broke out and now sits just below $250.

Even after this explosive rally -- a near doubling from the lows -- Nvidia is still more than 15% off its highs. If BofA analysts are right, the stock will take out those 2018 highs at some point this year.

While the stock is technically overbought, the trend is still intact. Dips down to uptrend support (blue line) and the 10-week moving average can be bought until they fail to work.

Keep in mind, this trend is down just below $225 at the moment. So even after an 8% correction, Nvidia stock would still technically be okay.

The $230 price was also a significant level, so holding that mark on the downside would bode well for the bulls. 

Below trend support and $230, and the bulls will need to give Nvidia time to digest its gains, particularly if it loses the 50-day moving average (not shown) that’s currently at $220.25 and rising.

On the upside, see if NVDA stock can take out the $252.02 level, which is the 23.6% retracement for the peak-to-trough range from the all-time high.