With shares of market leader NVIDIA Corp. (NVDA) once again moving down the ranks of the SIA NASDAQ 100 Index Report, we felt it was time to review the stock technically and provide insight into its recent moves.
Before digging into the chart of NVDA, let’s first step back and examine the broader sector to establish a backdrop against which to view NVDA. In the first table, we find the matrix position chart for the SIA Electronics and Semiconductor Equal Weight Index (EWI559). This index began showing signs of relative weakness in mid-November, declining into the yellow neutral zone, but subsequently found support and rallied back into the favored zone of the report. This rebound occurred during the low-volume days surrounding the American Thanksgiving holiday, when many market participants may have been away.
Next, we review the 2% point-and-figure chart of EWI559 for an investment-grade analysis. Here we observe the recent pullback during which the sector produced its first double-bottom signal since earlier in the year, a period when both the market and the sector experienced a healthy correction. However, no sooner was this bearish signal generated than the sector reversed higher, producing a bullish low-pole warning signal, no doubt leaving investment advisors perplexed by the mixed technical messages.Currently, EWI559 is pushing up against resistance near 136,528, with the latest reading at 128,122, roughly midway between resistance and initial support at the 3-box reversal level of 123,657. Additional support lies near 112,000, which marks the recent low. Beyond that, however, support is limited until the 2024 highs near 100,000, representing downside risk of approximately 20%–30%. This suggests the semiconductor sector is not without meaningful downside risk.
Turning to the point-and-figure chart of NVDA, we have overlaid its matrix position using the green, yellow, and red zones corresponding to the SIA favored, neutral, and unfavored classifications. Of note is NVDA’s recent move into the yellow neutral zone, accompanied by a decline in its SMAX score to a negative 4 out of 10, a near-term measure of relative strength against a basket of alternative asset classes. Seeing a leading stock within the SIA Electronics and Semiconductor sector move into a relative underperforming position is, eye-catching, to say the least.
On the upside, resistance may first emerge at the 3-box reversal level of $190.35, followed by additional resistance near $210.16, just above the all-time-high point-and-figure print. On the downside, initial support is visible near $165.71, with further support at $147.14. We have also highlighted an important longer-term support level at $93.31, derived from the lows of the spring selloff earlier this year.
Setting aside NVDA’s undeniable corporate strength and the significant benefits it has delivered to investors over many years, a purely risk-reward-based assessment—especially when viewed against the backdrop of declining relative strength— suggests that advisors may be keeping a close eye on NVDA.
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