Nvidia, (NVDA) the game-changing graphics-chip specialist, has struggled this year.
The stock made new 52-week lows Friday, down 64% from the 52-week high it reached in November.
To put it mildly, it has not been a good stretch for the stock. To be sure, the Santa Clara, Calif., company is not alone.
Last quarter, AMD reported solid results and mostly in-line guidance. Nvidia preannounced a big revenue miss, then followed that up with a lukewarm quarter and disappointing guidance.
Nvidia will host its GTC event this week, which may act as a catalyst. But it’s got a lot of fundamental and technical momentum working against it.
All this said, Nvidia has an excellent long-term outlook and the stock has been badly beaten down. For that reason, I want to take another look at the stock.
Trading Nvidia Stock
The weekly chart above shows Nvidia’s brutal correction, where the shares fell more than 63%, then bounced on Friday after tagging the 200-week moving average. We have been watching for a tag of this mark for almost a month.
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Now, this may be enough to get some bears off the train and some bulls onboard.
After all, if you’re short Nvidia, the trend has been your friend. But many of these shorts also consider that Nvidia’s 200-week could be notable support, and the stock will go down only so far.
Over the years Nvidia stock has been no stranger to big declines. In the past 12 years, the stock has suffered three major declines of more than 50% but — and this is a big but — no more than 57.5%.
The stock did suffer in 2008 and 2002, falling 85% and 90% from its peak, respectively. But the company is in a much different place now than it was then and I wouldn’t compare those periods with today.
After such a big decline and so much bad news priced in, this area may not be a bad spot for long-term investors to begin accumulating the stock. But if the overall market continues to roll over, then Nvidia stock may continue lower as well.
If the $125 to $127 area fails as support, that could open the door down to the $110 to $115 zone. There we find the 78.6% retracement from the all-time high to the covid low. In this zone, we also find the 2021 low.
Below $110 opens the door to the psychologically relevant $100 level, which is also where the monthly VWAP measure currently comes into play.
As for the upside, keep an eye on $145. This support level from July was most recently resistance. Above $150 puts the 10-week and 21-week moving averages in play, with the latter most recently acting as active resistance.
The bottom line: Nvidia stock has sustained maximum declines of 54% to 57.5% over the past dozen years. Recently down 63.5% from its highs and into a major support area could act as a bounce zone.
For long-term investors, an accumulation strategy may not be the worst idea.