Technical analysis of NVDA
NVDA, the representative CFD based on NVIDIA Corp’s shares, has made strong gains over the last few days after the company announced a four for one stock split on 21 May. Generally, NVIDIA has faced fewer supply problems than AMD since Q4 2020, and sentiment is generally positive on upcoming earnings. This technical analysis of NVDA looks briefly at the daily chart ahead of the company’s earnings report after hours tonight, 26 May.
NVDA’s earnings per share (‘EPS’) were good last year, with each release beating the estimate at least slightly. The confirmed ratio of price to earnings (‘PE’) for 2020 was about 75, making NVIDIA among the more overvalued tech shares by this measure. However, this share has generally outperformed the semiconductor sector since the start of 2021. PE for this year is expected to drop to about 60.
Back on the chart, the clearest resistance is the latest all-time high from last month just below $648.50. Low support seems to occur around $465, but $500 is an obvious psychological area ahead of this.
Technical indicators on NVDA D1
Moving averages give a fairly strong buy signal, with each of the 50, 100 and 200 SMAs successively above slower lines and below the price. The value area between the 100 and 200 SMAs is likely to remain in view as a support over the short term given the failed test of this zone from 12 May and strong bounce on 19 May.
Neither Bollinger Bands (50, 0, 2) nor the slow stochastic (15, 5, 5) give an overbought signal at the time of writing although the latter at about 73 is fairly close to the zone of buying saturation. Volumes is basically neutral with a slight bias towards buying. However, neither of these factors are likely to be very reliable for a CFD on an individual share.
Volatility has increased somewhat since February and NVDA’s average daily movement has increased significantly over the same period compared to January of this year. With no clear indication yet that the ascending channel on the weekly charts might be broken in the near future, one would traditionally point to the recent bout of gains since 19 May as a strong buy signal.
19 May opened with a gap down that was closed the same day, which would also usually suggest positive sentiment and willingness to buy despite NVDA’s overvaluation and loss of interest in tech shares among some participants in stock markets. It looks like $650 is the area to break, with more gains in view above this unless tonight’s news is particularly negative.
Technical analysis of NVDA: summary
NVIDIA Corp is expected to release its earnings report for the fiscal quarter ending April 2021 tonight, 26 May, after hours. The consensus estimate for EPS is $2.62, with the eight estimates ranging from $2.37 to $2.76. None of the estimates have been revised within the last four weeks.
The outlook for NVDA seems to be quite positive based on both technicals and fundamentals, making this share a potentially good symbol for tech bulls at the moment. As ever, though, volatility is likely and surprises are possible at tonight’s release, so holding significant positions overnight is risky.
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