Sign InSummary
NVIDIA Corporation (NVDA) experienced a pullback in the last trading session, but technical indicators suggest neither an overbought nor an oversold condition, indicating a potential continuation of its current trend without extreme momentum in either direction.
Technical Analysis
NVIDIA Corporation (NVDA) experienced a pullback in the last trading session, with a price decrease of 3.01%, closing at $481.11. This drop was on a volume slightly below the average volume, indicating less conviction in the sell-off. Although the price dipped, it stayed within the range of the stock's average true range (ATR) of $2.92, which suggests that the intraday volatility was within normal bounds. The relative strength index (RSI) of 56 indicates that NVDA is neither overbought nor oversold, pointing to a potential continuation of its current trend without extreme momentum in either direction.
The stock is currently trading above both its 50-day moving average ($461.56) and its 200-day moving average ($397.05), a sign of ongoing bullish sentiment. However, NVDA's moving average convergence divergence (MACD) is negative, at -6.49, which may signal a slowdown or reversal of the current uptrend.
For the short term, NVDA has established clear support at $439.38 and resistance at $487.16. A break above resistance might suggest further bullish activity, whereas a drop below support could indicate bearish momentum. With a stop-loss set at $462, the stock has reasonable downside protection for technical traders concerned about preserving capital in case of a decline.
Fundamental Analysis
NVDA carries a high price-to-earnings (PE) ratio of 63.39, which is quite elevated and may indicate that the stock is overvalued relative to earnings, especially when compared to historical PE ratios in the tech sector. Nonetheless, the earnings per share (EPS) of $7.59 underscores the underlying profitability of NVIDIA Corporation. The company's significant market capitalization, at around $1.19 trillion, reflects its market dominance and investors' confidence.
Amid the AI boom of 2023, NVDA has gained attention for its leadership in AI chip technology. NVIDIA has reportedly outperformed earnings expectations consistently throughout the year, which is indicative of operational excellence. NVDA is poised to gain from the ongoing enthusiasm in AI stocks, as suggested by the news highlighting regret for not buying AI stocks soon. With a substantial growth of 240% year-to-date, investor sentiment remains optimistic.
The upcoming dividends on December 28, 2023, with a yield of 0.01%, might not be the key attraction for investors, given the relatively low yield. However, it could indicate confidence from management in NVIDIA's cash flow stability. Analysts' consensus rating of "Buy," with 35 buys and only one sell recommendation among contributors, suggests a bullish outlook for the stock.
Predictions for Upcoming Trading
Considering the robust fundamentals and the technical indicators suggesting neither an overbought nor an oversold condition, NVDA is likely to remain stable in the following trading day, December 22, 2023. It could either consolidate around the current levels or experience slight bullish momentum if market conditions are favorable. For the upcoming week, NVDA may test the resistance level at $487.16, especially given the market enthusiasm around AI stocks and the general tech sector's growth prospects. Volatility might increase as the date of the next earnings announcement on February 21, 2024, nears, with investors positioning around the expected performance.
Overall Stock Evaluation
Considering NVIDIA's prominent position in the expanding AI market, consistent earnings beat, and year-to-date growth, the overall evaluation for NVDA is a "Buy." This recommendation is based on the stock's strong fundamental factors, market sentiment, analyst confidence, and technical support levels that provide an optimistic outlook over the short term. However, investors should remain aware of the potential overvaluation risks associated with the high PE ratio and keep an eye on any shifts in market sentiment that might impact the stock's trajectory. A critical watch of the support and resistance levels will be essential for making informed decisions about potential entries or exits in the coming days.
