Shares of Nvidia (NVDA) fell Monday after headlines informed that the company is being investigated by China. Investigators are looking into suspected violations of Chinese anti-monopoly laws.
Shares of the leading Ai chip manufacturer have already responded that the company will comply with the investigations. Chinese regulators look to be focusing on Nvidia’s $6.9 billion acquisition of network and data transmission company Mellanox in 2019.
So far this year, it is estimated that 14% of the chips manufactured by NVIDIA are shipped to China. That number is nearly half the shipments of NVIDIA chips just two years ago.
The headlines sent NVIDIA stock nearly 3% lower on Monday, closing the day’s trading at $138.81.
The drop in share price places NVIDIA in a familiar technical situation.
Monday’s trading activity saw NVIDIA shares drop to their 50-day moving average. This key trendline has been in a bullish trend since October, supporting an outlook for higher prices.
Monday’s close left shares just slightly above their 50-day with the chance that the stock will break below its key support.
This would mark the first close below the stock’s 50-day moving average Since September 17.
Investors should focus on NVIDIA’s activity around $140 as potential resistance with the knowledge that two closes below the 50-day will bring a sudden increase in selling pressure for NVIDIA shares.
NVIDIA is in a long-term bull market trend with a price target of $200. That said, the short-term outlook includes a higher probability that the stock is setting-up for a short-term correction that could see a buying opportunity at $115.
