The American multinational technology company that designs graphics processing units for the gaming and professional markets, as well as system on a chip units for the mobile computing and automotive market, NVIDIA Corporation (NASDAQ: NVDA) seems to be gearing up for a surge as per its latest charts.
Bullish Indications
#1 Ascending triangle pattern Breakout: The daily chart shows that the stock has currently broken out of an Ascending Triangle pattern and moved higher. An Ascending Triangle pattern is a bullish pattern. This is marked on the daily chart in purple color. The breakout level of the ascending triangle pattern generally acts as a good support level.
Daily Chart – NVDA
#2 Trading Above MAs: The stock is currently trading above both its 50-day and 200-day SMA, which implies that the bulls are currently in control.
#3 MACD Above Signal Line: In the daily chart, the MACD line (light blue color) is currently above the MACD signal line (orange color) which is typically considered bullish.
#4 Bullish Aroon: The value of Aroon Up (orange line) is above 70 while Aroon Down (blue line) is below 30 in the daily chart. This indicates bullishness.
#5 Bullish ADX: The ADX line has moved up from below –DI and +DI lines. The +DI and ADX lines are also currently above –DI line. This indicates possible bullishness.
#6 Flag Pattern Breakout: The weekly chart shows that the stock was in a strong uptrend after which it started consolidating and was in a narrow range. This is a classic flag pattern and is marked in the chart in pink color. A Flag is a continuation pattern. Whenever a stock breaks out of the flag pattern, it typically continues its previous trend (uptrend in this case). Currently, the stock has broken out of the flag pattern, which is a possible bullish sign.
Weekly Chart – NVDA
#7 Bullish Stoch: The %K line is above the %D line of the stochastic in the weekly chart, indicating possible bullishness.
#8 Bullish ADX and DI: The weekly chart shows that the ADX line and the +DI line is currently above the -DI line, indicating possible bullishness.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level of NVDA is above Friday’s close, which translates to a price of around $601.00.
TP: Our target prices are $620 and $640 in the next 2 to 6 months.
SL: To limit risk, place a stop loss at around $588.70. Note that this stop loss is on a closing basis.
Our target potential upside is 3% to 7% in the next 3-5 months.
For a risk of $12.30, the target rewards are $19.00 and $39.00. This is a nearly 1:2 and 1:3 risk-reward trade.
In other words, this trade offers nearly 2x to 3x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down with high volume from the ascending triangle breakout level. The sell-off of the stock could also be triggered in case of any negative news, overall weakness in the market, or any regulatory changes in its sector.
Happy Trading!
— Tara
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