Technical analysis of NVDA
Like various other big tech shares, NVDA – the representative CFD based on NVIDIA Corp’s shares – has declined somewhat so far this week. Stock markets in general were somewhat nervous yesterday, but overall NVIDIA’s fundamentals remain strong. This technical analysis of NVDA looks at the daily chart ahead of the company’s earnings report tomorrow, Wednesday 24 February, after hours.
Global shortages of graphic cards and ongoing high demand both for gaming and mining cryptocurrencies have provided strong headwinds to chipmakers over the last few months. NVIDIA’s earnings per share (‘EPS’) also beat estimates throughout 2020 by at least a few cents. However, NVIDIA remains among the most overvalued tech shares, with its ratio of price to earnings (‘PE’) for 2020 confirmed as over 125.
Back on the chart, the clearest resistance is the latest high just below $615. Low support seems to fall obviously around the psychological area of $500, but we can probably point to other, nearer areas in the next few days.
Technical indicators on NVDA D1
Moving averages continue to give a buy signal, with price above both the 50 and 100 SMAs and faster line above the slower. The value area between them though is tiny. Support from moving averages is likely to come around $540 in the event of a negative surprise tomorrow night.
The slow stochastic (15, 5, 5) at 81 remains overbought although price has now moved back inside the upper deviation of Bollinger Bands (50, 0, 2). Volume for the CFD remains relatively low compared to Q3 2020.
The roughly defined wedge from early November 2020 to the very beginning of February might provide some areas of possible importance over the next few days. The latest top pre-breakout around $556 could be a support this week if losses continue, while the current area of about $576 was also the high from 6 and 9 November.
No significant gaps up or down are visible over the last few weeks on this chart. 8 February’s very large up candle might be taken as a strong buy signal on another chart like forex or commodities, but relying on individual candlesticks for a CFD on a single share is extremely risky.
Technical analysis of NVDA: summary
NVIDIA Corp is expected to release its earnings report for the fourth quarter of the fiscal year ending in January 2021 tomorrow, Wednesday 24 February, after hours. The consensus for EPS is $2.20 with the nine estimates ranging from $2.07 to $2.28.
While the technical picture for NVDA remains positive on the whole, the scope for more strong gains above the latest high seems to be limited in the absence of a clear catalyst other than earnings. Ongoing consolidation seems to be favourable unless there’s a notable surprise in either direction tomorrow night.
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