Is Nvidia’s 30% surge higher just the beginning?

  • master
  • 12.07.2019
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Nvidia was one of Wall Street’s best-loved stocks. The chipmaker rode the cryptocurrency boom to incredible heights thanks to their high performing graphic cards for crypto mining rigs. From January 2016, the stock rallied nearly 1,000% higher to its all-time high in October 2018. But then something happened that no one from Wall Street predicted – a 57% crash in its stock price as the crypto bubble burst.

Now, Nvidia is back in the news as its stock price surged 30% in June alone. In this article, we explore what’s happening with Nvidia right now and the possible trading opportunities around what was one of Wall Street’s favourite stocks. Let’s get started!

What’s happening with Nvidia?

Nvidia has been on a roller-coaster ride in the past year due to a variety of market specific factors and company factors. The collapse in the cryptocurrency market created a huge hold in the demand of Nvidia’s graphics processing units (GPUs) for miners. The US imposed tariffs on Chinese goods also didn’t help, as did weaker demand from the gaming sector.

However, in June Nvidia surged higher more than 30%. Is the company on the verge of a turnaround or are there other factors involved? Most analysts believe it is the latter. June brought a huge turn around in the cryptocurrency market with Bitcoin (BTC/USD) surging more than 80% higher. This most likely brought crypto miners back into the game.

In fact, Nvidia has no new product announcements scheduled for this summer which may end up weighing on their stock price and limiting any further bullishness. Investors were excited about Nvidia’s recent launch of the industry first real-time ray tracing GPUs. However, it failed to create any spark due to their high price, absence of a ray-tracing-supported ecosystem and only marginal performance improvements to existing games.

It seems like Nvidia’s fate – for now – is still tied to the fate of the cryptocurrency world. However, this can provide some interesting short term trading opportunities. Let’s take a look at the chart of Nvidia’s stock price.

How to Trade Nvidia Stock

With Admiral Markets you are able to speculate on Nvidia’s stock price by using a product called CFDs, or Contracts for Difference. Essentially, this enables traders to go long and short on an instrument.

Below is the long-term weekly chart of Nvidia’s stock price:

Source: Admiral Markets MT5 Supreme Edition, NVDA, Weekly – Data range: from March 11, 2012, to July 11, 2019, accessed on July 11, 2019, at 10:50 am BST. – Please note: Past performance is not a reliable indicator of future results.

It’s clear to see the meteoric rise in Nvidia’s share price before the collapse in 2018. However, the most recent price action is lacking any clear long-term bias. It is difficult to answer the question of who is in control of the market? Buyers or sellers? Let’s go to the lower timeframe to see if there is any more clarity.

Source: Admiral Markets MT5 Supreme Edition, NVDA, Daily – Data range: from November 7, 2018, to July 11, 2019, accessed on July 11, 2019, at 10:54 am BST. – Please note: Past performance is not a reliable indicator of future results.

In the above daily chart of Nvidia’s share price we now have more clarity thanks to the blue 10-period moving average line. Moving averages are useful in helping to identify who is control of the market. For example:

  • When the price is below the moving average it is clear to see sellers are in control.
  • When the price is above the moving average it is clear to see buyers are in control.

Of course, there will be times the price breaks through the moving average as buyers and sellers battle for control of the market. In the above daily chart, the price has remained above the 10-period moving average for the month of June. If the price can continue to stay above it, short-term traders will continue to push the market higher. However, keep a close eye on whether sellers manage to break through the moving average.

Traders will often use price action patterns to help time their trades. For example, a popular price action pattern is the bullish pin bar or low test bar reversal formation. This is where the price makes a new daily low but buyers push it all the back up to close higher on the day, signifying a possible reversal. Nvidia’s share price formed a bullish pin bar on 24 June, above the 10-period moving average as highlighted below:

Source: Admiral Markets MT5 Supreme Edition, NVDA, Daily – Data range: from March 12, 2019, to July 11, 2019, accessed on July 11, 2019, at 11:03 am BST. – Please note: Past performance is not a reliable indicator of future results.

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