Updated from Feb. 8, 2017 with latest share price level.
There is a very familiar pattern building in Nvidia (NVDA) stock and this pattern has extremely high "if/then" predictability. It's called a parabolic rally, and Nvidia's parabolic rally is nearly complete. It will be followed by a crash in the stock's price.
In an article published in December on Real Money, we wrote that our decision support engine was warning of an imminent peak and reversal, regardless of any corporate news. This is because of the crowd's complete adoption of bullish certainty that Nvidia's business prospects not only can result in its share price continuing higher but must result in nothing but a rally.
On Thursday afternoon, shares were trading at $117.86, down 75 cents, or 0.6%. The company plans to report its fiscal fourth-quarter results after the bell Thursday.
As you can see from reviewing that Real Money analysis, the same certainty was reached by the crowd as Qualcomm (QCOM) shares went parabolic into the late 1999/early 2000 peak. It was a fun ride in the final three months, which took Qualcomm from the low $20s to the high $70s, but the crash came fast and furious and spelled big losses for those who bought shares late in the rally.
If you are telling yourself "It's different this time," remember that those four words are the most dangerous four words in the investment world, as human subjectivity and ego-attachment to being right never change.