NVIDIA Stock Analysis: Overbought Territory Signals Caution Amid Growing Volatility

StockInvest.us, 4 weeks ago

NVIDIA Technical Analysis

NVIDIA Corporation (NVDA) closed at $130.78 on June 20, 2024, reflecting a -3.54% decrease. The stock's trading range for the day was between $129.53 and $140.76, hitting a new 52-week high. The market cap stands impressively at $3.22 trillion, with trading volume at 504.89 million, above the average volume of 440.53 million, indicating significant investor interest.

Key technical indicators include an RSI14 of 76, suggesting that NVDA is in overbought territory. The MACD (3-month) is positive at 12.36, indicating bullish momentum. The stock is trading significantly above its 50-day moving average of $99.28 and its 200-day moving average of $68.61, underscoring a strong upward trend.

Despite the recent dip, the support level at $120.998 and resistance at $130.98 will be critical to monitor. Given the ATR of 4.00, substantial price volatility can be expected. The stop-loss at $125.50 provides a near-term risk management level.

Fundamental Analysis

NVIDIA's fundamentals present a complex picture. The company boasts a P/E ratio of 76.48, significantly higher than the industry average, suggesting that the stock may be overvalued. Its EPS stands at $1.71. The dividend yield is minimal at 0.01%, indicating that NVDA is not particularly attractive for income-oriented investors.

The intrinsic value calculated through discounted cash flow (DCF) analysis is approximately $56.99, which is much lower than the current trading price, further emphasizing potential overvaluation.

The upcoming earnings announcement on August 28, 2024, will be a crucial event, with substantial market reactions likely based on the performance and guidance provided. Additionally, the next dividend date on June 28, 2024, could impact short-term investor sentiment.

NVIDIA News and Sentiment Analysis

Recent news provides mixed signals. Concerns about long-term performance and increased bearish sentiment, highlighted by a spike in bearish options and mentions of potential risks equivalent to the Dot-Com bubble, contrast sharply against positive news of strategic partnerships like the one with HPE in AI-driven projects.

The mixed analyst sentiment, with a notable 41 buy ratings and overall strong buy consensus, combined with recent market worries, reflect a divided outlook among market participants.

Short-term and Long-term Projections

For the next trading day (June 21, 2024), expect volatility around current levels, influenced by general market conditions and investor reactions to recent news. Over the next week, monitor price movements between the support level of $120.998 and resistance at $130.98 with significant potential for volatility.

Long-term, the devaluation based on intrinsic value and high P/E ratio poses correction risks. However, strategic initiatives in AI and historical upward momentum support optimism.

Overall Evaluation: Hold

Given the overbought status, potential overvaluation, and balanced by positive strategic initiatives and solid historical performance, NVDA currently appears as a 'Hold' candidate. This stance accounts for the need to watch upcoming pivotal announcements and broader market conditions before making further investment considerations.

Check full NVIDIA forecast and analysis here.