On November 19th, 2024, we highlighted Nvidia Corp. (NVDA) in the SIA Daily Stock Report the day before its earnings report, which is often a risky proposition for prognosticators. However, armed with the confidence of the SIA platform, which was showing many warning signs, SIA published its independent thinking. The news wasn't good and alerted elite SIA practitioners to the fact that the electronics and semiconductor sector had lost its relative strength. As the old saying goes, the soldiers were no longer following the general. While that is an old market adage, it was signaling an elevation of risk that was creeping into the Nvidia trade. Also noted were the negative bullish percent readings, where the majority of the other semiconductor names were already under the control of supply (aka the sellers) on their own point and figure (PNF) charts, including Nvidia, which was exhibiting a bearish high pole warning PNF chart pattern. At that time, we noted that while leading names in the space—namely Nvidia, Broadcom, KLA, and Micron (the generals)—were still exhibiting some relative strength, SIA defined this position as the 'best of the worst' due to the poor risk/reward parameters detected by the SIA platform. Nvidia was essentially a "lone wolf" within the semiconductor sector. For context, SIA also highlighted significant resistance at both $140 and $150, with initial support at $130, and limited support down to $90. Overall, SIA concluded that while Nvidia did remain technically strong within the SIA Index Reports, the risk/reward parameters of the sector suggested weak risk/reward ratios, meaning elite advisors may need to manage these high-risk readings. Since this report, Nvidia has indeed failed to penetrate resistance and has slipped below initial support at $130. SIA’s main coach relative strength has also pushed into negative territory, along with the rest of the sector. For a visual representation of this slippage, take a look at the SIA matrix position chart attached, where NVDA shares now find themselves deep in the unfavored zone of the SIA NASDAQ 100 Index Report. This is also presented in the point and figure chart attached, where we have engaged the SIA matrix position overlay tool to emphasize this loss of relative strength against its peers. On this chart, you can also see the lack of relative strength within the Electronics and Semiconductor sector (RED) and the negative SMAX score of 0/10 that NVDA now has against other asset classes. Much like the November 19th report, SIA still detects powerful resistance at $150.09 at the top line, with near-term resistance equally strong at the $130.66 level. Support is observable on the SIA point and figure chart at the $97.08 level, but it may find psychological support at the whole number $100, which can often become a pitstop zone for market participants. Given the lack of strength in our main coach, SIA can go ahead and highlight further zones of support on the point and figure chart at the $75.05 level, as well as the $49.51 price tag, as sadly there is little support for this stock that was a rocket ship on the way up.
The second chart presented is the SIA weekly candlestick chart that shows approximately 2 years of trading data. Here we can see the steady growth of the shares, as illustrated with the thin black line. Also highlighted is the break of this trend line and the selloff on massive volume, as shown by the double-sided red arrow. Seasoned advisors might agree that sometimes these situations are slow-moving train wrecks, difficult to see amidst a sea of talking heads, where it can be hard to see the forest for the trees. The hallmark of the SIA platform is its ability to measure risk, which is accomplished through multiple methods. The primary indicator is relative strength, calculated daily by comparing asset classes, sectors, and 80,000 investments across hundreds of reports. These readings offer a data-driven approach, enabling skilled operators to manage risk in a rules-based, rather than gut-based, way.
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