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Trading Nvidia and Chip Stocks: Here Are the Charts

Nvidia, AMD and the entire semiconductor space are under pressure. Here are the key levels to know now.

Semiconductor stocks have not been doing well lately. Generally speaking, a bear market in U.S. equities and a particularly vicious bear market in growth stocks and tech stocks have dealt a painful blow to this sector.

Recently making matters worse is the growing chorus of an impending recession. In fact, some say we’re already in a recession.

I value semiconductors as a tell on the global economy. Almost every industry — from automotive to healthcare to industrials — uses semiconductors. As goes the economy, so goes this group.

Not surprisingly, the VanEck Semiconductor ETF  (SMH)  has not performed well. The ETF made new 52-week lows this morning, down 40% from its high.

Graphics-chip specialist Nvidia  (NVDA)  also made new 52-week lows on Tuesday but has declined even further from it high, down almost 60%.

Let’s look at the charts to see what’s going on with these names.

Trading Nvidia Stock

Weekly chart of Nvidia stock.

Weekly chart of Nvidia stock.

An industry leader it may be, Nvidia stock has not performed all that well this year. With last week’s decline, Nvidia stock traded into a key area near $150. This zone was prior resistance for nearly a year.

Now the stock is having its first real retest of this zone since it broke out more than a year ago, and the bulls are hopeful that it will act as support.

A similar hope is in play for Advanced Micro Devices  (AMD) , but instead of retesting prior resistance, the stock is leaning on prior support. These stocks tend to trade in tandem, so the bulls are looking for both to fetch a bid soon.

So far on Tuesday, AMD and Nvidia are reclaiming last week’s low. For the latter, that’s the $143.92 level. Above that and aggressive traders can be long with a stop-loss just below this week’s low.

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A bounce could put $160 in play, followed by active resistance via the declining 10-week moving average.

If Nvidia fails to bounce and trades back below last week’s low and continues to erode, the $110 to $130 range could be in play.

There we find the following measures (in order): The 161.8% downside extension from the recent range, the rising 200-week moving average near $120, the 2021 low near $115 and the 78.6% retracement near $110.

Below all those levels is the monthly VWAP measure near $100.

Unfortunately, Nvidia stock is in a downtrend. Fortunately, the levels are clearly outlined.

Trading Semiconductor Stocks

Weekly chart of the SMH ETF.

Weekly chart of the SMH ETF.

The SMH ETF chart has an interesting look. The $220 level was a clear zone of interest. It failed several weeks ago and the bears have remained in control since. Amid that stretch, the declining 21-week moving average was active resistance.

The ETF slumped below the monthly VWAP measure with today’s action and is struggling to regain this level.

If it can reclaim it, we could see a move back to $200. Above $200 and the $220 level could be in play, along with the declining 10-week moving average.

On the downside, the bulls must beware of a potential move into the $180 area. There the SMH ETF finds the rising 200-week moving average and the key 61.8% retracement. At the very least, I would expect some sort of bounce from this area.

If not, the mid-$150s could be in play.