Nvidia (NVDA) is under the spotlight as it prepares to release its highly anticipated earnings report after Wednesday’s closing bell. The chipmaker, known for surpassing Wall Street expectations due to robust demand for its AI silicon products, is projected to report a 73% increase in fourth-quarter revenue compared to the previous year, with net income rising to $21.08 billion from $12.84 billion.
Despite being flat on the year, Nvidia shares have gained 12% this month as of Friday’s close. Analysts remain bullish on the stock amid increased spending on AI infrastructure by big tech hyperscalers. However, the stock fell 4.1% to $134.43 on Friday amid a broader market sell-off.
A technical analysis of Nvidia’s chart reveals that shares have consolidated in a descending channel since mid-December, with declining trading volumes. A bearish engulfing pattern emerged on Friday, signaling a potential downturn ahead of the earnings report. This pattern has appeared twice before since the stock hit its record high in early January, both times preceding further declines.
The relative strength index (RSI) mirrors the price action, showing lower highs since the start of the descending channel, indicating reduced buying momentum.
Key support levels to watch include $130, where shares may find support near a trendline connecting the August peak with December and January troughs. A drop below this level could lead to a decline toward $113, near this month’s swing low. A more significant post-earnings drop could bring the $102 level into play.
On the resistance side, a breakout above the descending channel’s upper trendline could push shares toward the $153 level, near the stock’s all-time high. Using the measured move technique, a bullish target above the ATH forecasts a potential target of $174, nearly 30% above Friday’s closing price.
— news from Investopedia