Analysing the Impact of Nvidia's Stock Price DropWhile the sharp decline in Nvidia's stock price made headlines yesterday, let’s assess the actual technical damage caused by the move.
Attached is a weekly chart, displayed with logarithmic scaling. This scaling method is used because Nvidia's share price has grown exponentially over the past few years, making percentage-based changes more meaningful for analysis. On a logarithmic scale, vertical spacing represents percentage changes, ensuring a consistent visual representation of relative movements.
Key Observations:
1. Trend Break Confirmation
The first notable point is that Nvidia's uptrend, which began in 2022, was broken not yesterday but several weeks ago. This predated the recent sell-off, indicating the potential for weakness had already emerged.
2. Critical Support Levels
The sell-off now approaches two significant technical levels:
o The 55-week moving average (MA) at 112.46.
o The 38.2% Fibonacci retracement level at 98.52.
These levels are worth monitoring closely as potential support zones.
Questioning the Trend
The pressing question is whether this marks the end of the bull run or merely an aggressive correction within an ongoing uptrend. For now, I lean towards the latter interpretation, as there isn't sufficient evidence to declare a full trend reversal. A single day of sharp decline doesn’t necessarily confirm the onset of a bear market—at least not yet.
Final Thought
One down day, while significant, doesn't define a bear market. It’s important to watch how the price action unfolds around the aforementioned support levels to gain clarity on the longer-term trajectory. Not investment advice
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About Logarithmic Scaling
Logarithmic, or "percentage," scaling ensures that equal vertical distances represent equal percentage changes. For example, the vertical distance between 10 and 20 (a 100% increase) is the same as the distance between 50 and 100. This scaling is particularly useful for analysing stocks with large price growth over time.
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