NVIDIA shares fell 4% Friday afternoon after starting the day’s trading slightly higher. The reversal may be a sign that investors need to watch heading into the tech heavy earnings report next week.
Shares of the AI giant rallied in early trading following Mark Zuckerburg’s capital expenditure announcement. Meta’s plans include extensive expansion of the company’s AI resources, utilizing NVIDIA GPUs.
NVIDIA stock prices started to fade shortly after stocks started trading while Meta Platform (META) shares continued to rally through the day.
NVIDIA’s relative weakness may be a sign that the stock is slipping further into a slightly bearish trend.
Two weeks ago, NVIDIA shares surged to new intraday highs above $150. Those momentary highs were met with immediate selling pressure as the stock reacted to the round-numbered $150 price point.
From there the stock dropped to a familiar price for support, $130. That support resulted in a short-term bounce, fueled by the post-inauguration rally.
In a short-term twist, shares of NVIDIA saw significant selling today before they had the opportunity to move above their recent highs.
Here’s what that means…
NVIDIA shares have been trading in a tight range since November, losing leadership against the broader market indices.
Next week, the stock faces the very real possibility that it will see its recent lows of $130, forming a critical test of the stock’s recent range.
If the stock is unable to hold that critical $130 price, a new phase of short-term trading patterns will begin, taking NVIDIA to a target price of $120.
That would also form a short-term bearish pattern of lower highs and lower lows for NVIDIA stock.
From a long-term perspective, investors aren’t likely to see much heavy selling of NVIDIA as the company is preparing to provide its quarterly earnings report on February 26. NVIDIA has a long history of “Buy the Rumor” activity ahead of its earnings calls.
That would put extreme pressure on the company to provide stellar earnings results and outlooks to maintain its recent trading range.
As a result, the intermediate-term outlook for NVIDIA stock is neutral.