Semiconductor Super Cycle?

The AI boom has thrusted many semiconductor comapnies valuations upward. NVDA has received most of the positive sentiment from investors and analysts alike. The past two earnings calls from NVDA have successfully proven they could match their recent sky high valuations.

Their most recent earnings call has shown that the AI chip demand is much more than just hype, and NVDA is benifiting from the increased demand. They even continue to provide future guidance indicating even more upside.

So why did NVDA shares sell off the day following their earnings release? Could this be mere profit taking after a massive year-to-date rally? Are investors derisking before the historical seasonality of September brings down the markets? Could this be the beginning of another tech bubble? Let's check out the technical picture to see the potential trajectory of NVDA's share price.

The first thing I look at with any ticker is the long-term trend. The long-term trend is a strong uptrend with this name. As for a long-term investment, NVDA appears to be a good investment, especially in an age of strong and growing technological dependence. I think it is safe to say that semiconductors will be in demand for the forseeable future.

The year-to-date trend is a strong uptrend as you can see in the chart below. The recent selling in this name could have been expected as the price action of NVDA has been in extreme oversold conditions on the weekly candles for quite a while.

There is also a bearish cross forming on the weekly MACD subindicator. If the selling continues, then this bearish cross will be confirmed and could possibly instigate more selling from the technical traders.

The short-term picture for NVDA looks a little worrying as the RSI indicator is showing a bearish divegence on the daily candles. This could be an indication of a weakening trend.

But always remember that the price will remain in oversold conditions during a strong rally.

In the chart directly below, I have highlighted the short-term trend with purple lines. You can see how NVDA seems to be staying within the support and resistance levels of this trending price channel. At the end of last week, the price rejected the upper resistance level and is currently headed on the way down to support.

How do you think NVDA will perform this week?

Personally, I like the semiconductor industry. I believe that NVDA is one of the best within this secor. I also believe that this rally has more legs to the upside. But nobody truly knows when the selling will start and stop. If the recent selling continues into this week, then there are a few areas I am watching for possible price support.

The one thing that worries me is the increasing worries between companies and investors about how the rest of the year will be troubling times in the market and the economy. They have a lagitimate basis to that argument as the lag effects of the interest rate hiking regime are beginning to be felt within the economy.

Regardless of how bad the narrative is being portrayed, I have heard the bearish story a million times, so I will just follow the trend. And with a strong rally like NVDA is experiencing, I am basically waiting to buy the dip until there is a solid negative catalyst that brings down the market as a whole, or at least the semiconductor sector.

As always, this is not investment advice. Good luck trading. Be careful and be patient. Dont anticipate the market. Rather, participate in the market. 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.

Very soon I will be presenting a live stream on the Moomoo platform. I will be going over options investing throughout the economic cycle. You will see some examples about how to manage your investments through the ups and downs of the economic cycle. You might find some valuable insight so sign up for the live presentation by scanning the QR code or clicking the link below.