After a Melt-Up, Be Wary of an Nvidia Meltdown

[Trading With Larry Benedict]( After a Melt-Up, Be Wary of an Nvidia Meltdown By Larry Benedict, editor, Trading With Larry Benedict When the boom in Big Tech unravelled last year, Nvidia (NVDA) felt the heat more than most… It peaked in November 2021 at around $346. And by the time it bottomed out in October, NVDA had lost more than two-thirds of its value. Compare that to the Nasdaq, which dropped 38% over the same time. However, from there, the Nasdaq’s and NVDA’s fortunes soon reversed… While the Nasdaq struggled to hold support in the last quarter of 2022, NVDA went on an almighty tear. NVDA got an expected surge in demand for its graphic processing units (GPUs) to power AI chatbot software like ChatGPT. Its share price rocketed more than 70% in just a couple of months. Then, after a quick pullback in December, NVDA surged higher. But now, NVDA is trading on a price-to-earnings (P/E) ratio of over 130… and it’s up around 126% since October… So today, I want to see if this winner is overcooked. Recommended Link [The #1 stock for 2023]( [image]( Investment expert Brad Thomas knows how to pick stocks. He bought Starbucks back in 2006… He bought Nike in 2003… And he and his team delivered a perfect track record from March 2020 to September 2022. Now, for a limited time, he’s revealing his #1 stock for 2023… [Get its name here.]( -- Heading in Different Directions The chart below shows NVDA’s clear downtrend last year. The 50-day Moving Average (MA, blue line) sloped down, and NVDA made a series of lower highs at spots “A” and “B.” Nvidia (NVDA) [Image] Source: eSignal Both down legs after “A” and “B” coincided with two key technical signals… - The Relative Strength Index (RSI) broke down through support (green line) and stayed in the lower half of its range. - The 10-day MA crossed below the 50-day MA, confirming the down move. However, coming into September, a common reversal pattern started to unfold… While NVDA was making lower lows (upper orange line), the RSI was trading sideways (lower orange line), forming lots of tiny Vs in oversold territory (lower grey dashed line). When the price and RSI are heading in different directions (in this case converging), a change of direction is likely. [The One Ticker Retirement Plan Over the Shoulder Demo Now Available]( And that is what we saw. The RSI bounced and then tracked up through resistance. And NVDA’s huge rally got underway. That rally accelerated with the RSI, gaining traction in the upper half of its range. However, this time, the divergence between the RSI and NVDA’s stock price (red lines) temporarily brought NVDA’s rally to an end. After a brief dip below support, the next leg of NVDA’s rally kicked off with the RSI bursting back into its upper range. You can gauge the strength of that up move by the 10-day MA (red line). It accelerated above the 50-day MA. Take another look: Nvidia (NVDA) [Image] Source: eSignal But the RSI is again making lower highs while NVDA makes higher highs… And NVDA looks vulnerable. So what am I watching for here? Free Trading Resources Have you checked out Larry's free trading resources on his website? It contains a full trading glossary to help kickstart your trading career – at zero cost to you. Just [click here]( to check it out. Repeatable Patterns The RSI trending lower has led NVDA to retrace lower from its recent high on March 9. And as you can see in the chart, that action has the RSI back down around support… When the RSI bounced off this level in late February, NVDA enjoyed a nice little boost. I’ll be looking to see if this pattern repeats. If the RSI instead breaks below support, however, then this current pullback has further to go. The other thing I’m watching is our MAs… Right now, the 10-day MA is still tracking above the 50-day MA. It’s still early days with the current move… But if the 10-day MA reverses and crosses below the 50-day MA (with both turning lower), then NVDA’s pullback could develop into a far bigger down move. Regards, Larry Benedict Editor, Trading With Larry Benedict Reader Mailbag In today’s mailbag, [One Ticker Trader]( thank Larry for his service… Just wanted to give a big thank you to Larry and his team for my very first options trade on QQQ puts. First trade is GREEN! – Anthony R. My first options trade is a 65% profit. Hi Larry, you teach trading in such simple terms that a newbie like me is getting it. Thank you so much for giving me this opportunity. – Lou S. Thank you for your thoughtful comments. We look forward to reading them every day at feedback@opportunistictrader.com. IN CASE YOU MISSED IT… [Get access to Market Wizard’s top strategy for 2023]( Larry Benedict is an incredibly successful yet relatively unknown trader. For the first time, he is coming forward to share a brand-new forecast to make all the money you need in any market, using a single stock. [Click here to watch the video that could jump start your investing in 2023.]( [image]( --------------------------------------------------------------- Get Instant Access Click to read these free reports and automatically sign up for daily research. 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