Nvidia’s recent stock drop reflects a wider mid-summer trend where investors are shifting their attention from big tech companies to smaller stocks. Steve Eisman mentioned on CNBC that this shift is due to investors wanting to diversify their portfolios. Even though Nvidia’s (NVDA) fundamentals are strong, the rapid rise in tech stocks has led to some selling as investors reassess their positions. This trend matches the overall market sentiment, with Nvidia’s stock facing pressure despite its strong past performance.
From a technical viewpoint, Nvidia’s stock is still above its 200-day moving average (MA), which is on an upward path. This indicates that, despite recent drops, the stock is in a long-term uptrend. Since surpassing the 200-day MA in January 2023, Nvidia’s stock has surged about 540%, though it’s currently around 34% above this average. The recent dip might be nearing a support level similar to the 34% drop seen in April. If the decline continues, the stock could test past support levels or enter a consolidation phase before its August earnings report, allowing the moving average to rise.
Trading volume analysis suggests the current sell-off might be slowing down. The 50-day moving average of trading volume has been decreasing since April, indicating that selling pressure is easing. Inside Edge Capital holds a 6% position in Nvidia and has 2% in cash for potential additional investments. Meanwhile, TradingAnalysis’s ’fast money’ model remains positive on Nvidia, using a $115/$100 put spread until early August. Based on technical and fundamental factors, the stock is expected to drop below $100 but find support in the mid-$90s before stabilizing, backed by continued earnings growth.
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