Takeaways
- Nvidia shares fell on Monday to snap a four-day winning streak following news that China's Huawei Technologies is developing a rival AI chip.
- The stock is pushing up against the upper edge of a falling-edge pattern, which could be paving the path for a breakout bullish.
- Investors should watch key overhead areas on Nvidia's chart around $115 and $130, while also monitoring crucial support levels near $96 and $87.
Nvidia’s (NVDA) stock fell on Monday, ending a four-day streak of gains following the news that China’s Huawei Technologies was developing a competing AI chip.
The Wall Street Journal reported on Monday that the Chinese firm hopes that the new chip can replace some of Nvidia’s high-performance products. It added that it has approached a number of Chinese tech companies to test the technical feasibility of this chip.
Nvidia shares have gained about 25% since their low of early April but lost around a 5% of their value from the start of the new year, as of Monday. In recent weeks, the AI favorite’s shares have been under pressure as a result of concerns over significantly cheaper AI tech coming out of China. Also, a federal crackdown has been implemented on the export to China of the company’s H20 chips.
Below, we examine Nvidia’s graph and use technical analysis to identify important price levels that are worth keeping an eye on.
Falling Wedge in Focus
Nvidia shares continue to oscillate within a falling wedge after a bear trap emerged on the chart earlier this month, a trading event that lures investors to sell upon a breach of major support—the pattern’s lower trendline in this case—before the price makes a sudden move higher.
Recent price movement has seen the price push up against the upper trendline in the pattern. This could pave the way for an upward breakout. The relative strength indicator (RSI) is also back above 50, indicating improved price momentum.
We’ll identify two key overhead areas that could be in play on Nvidia’s chart and also locate important support levels worth monitoring.
Key Overhead Areas To Watch
The shares could initially test $115 if they break out above the upper trendline in the falling wedge pattern. This area may act as overhead resistance near April’s swing high. It also coincides with several retracements in the chart going back to September last year.
Buying above the area could trigger a rise to around $130. Investors who bought shares at lower price points could look for exits in this area near last year’s prominent peak of August and December trough. This area is also located just below a projected upside target for the bars pattern. The stock’s upward movement following a bear trap on a chart is then overlayed from this month’s lowest price.
Crucial Support Levels Worth Monitoring
A move below $96 could lead to another test of support. Investors could look for opportunities to buy at this level, near the swing low of last week and two notable peaks on the chart that formed in March last year.
Nvidia’s shares could return to their lower support level around $87 if the lower trendline of the falling wedge pattern is broken. This area on chart may provide some support near the beartrap low and aligns with a range in price action between March to May last year.
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