Will NVIDIA's Rally Continue Next Week?
NVDA is currently one of the strongest equities in the stock market. Last week, after printing all-time highs, the ticker closed in the red. Will there be more selling this week for the semiconductor company? Or will NVDA climb to new all-time highs next week?
It appears that NVDA is forming a consolidating ranging pattern. The pattern is not quite confirmed yet, but if this week starts off with strong selling, then the resistance of this range will be more well defined. If this price channel is indeed confirmed, then I might expect the price to drop to the support level of this channel.
I hate to go short on a stock that has been ripping, but there seems to be a slight bearish divergence in relative strength of price action. You can see the RSI divergence in the chart below. One thing I should point out is the several times RSI value has bounced or stayed above the 50 value during this strong rally. If this rally is to continue this strongly, then we might see this happen again, and the rally will continue. If the RSI value drops below 50, then it is in bearish territory, and the downside will be confirmed at least for a short period.
The entire semiconductor sector is in a strong rally, so I would find it difficult to enter into or hold a short position very long. Of course you dont want to fight the trend, but this rally has been overheated for a few weeks. Hence the selling last week. With the divergence in RSI in the short term, I am tempted to short the stock for a quick trade next week. If I did short the stock, then I would be paying attention to the nearest support levels for a potential bounce in price action.
In the chart below, you can see the nearest support levels to watch if the price begins to fall next week. These are short-term support levels, but they are the only levels to work with. The next nearest support level is the previous all-time high printed at the top of the rally after the pandemic crash.
I hate to short NVDA. But this ticker can move plus or minus 20 dollars in a single day. It is an options traders best friend and worst enemy. With moves that big regularly, it pays off to watch for any areas to cover your longs or enter into a short position. Especially when this ticker is very heavy on the long side.
What do you think will happen with NVDA? Do you think this rally has more legs, or is the rally nearing its end?
As always, this is not investment advice. Good luck trading. Be careful and be patient. Give your investments time. Don't be greedy. Don't invest in anything you don't understand. Don't put all of your eggs in one basket. Don't listen to the hype. Don't fomo or panic into or out of trades. And just follow the trends. A trend is your friend.
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