Stock of the day: Nvidia
25 August 2023
Few events in the trading world garnered as much attention this week as NVIDIA's earnings announcement. Expectedly, Wednesday concluded with NVIDIA publishing its earnings, and to the delight of many, they were nothing short of exceptional. Riding on this wave of positive sentiment, the post-session hours witnessed a roughly 7% surge in the tech giant's stock value. But as is often the case with the stock market, the real drama unfolded the next day.
Thursday started on an optimistic note, with NVIDIA's stock opening at elevated levels. However, as the hours ticked by, it became increasingly evident that the bullish sentiment was waning. The stock price began to retreat, marking a distinct reversal from the prior session's after-hour trading.
This trend prompts a few important questions: Why did NVIDIA, despite its commendable performance, not maintain its bullish momentum? Two primary factors seem to be at play here.
Firstly, the external backdrop. It's crucial to remember that NVIDIA didn't operate in isolation. Thursday witnessed a pronounced bearish tilt in the broader market, with indices across the board experiencing sharp reversals. Such overarching market dynamics inevitably exerted their influence on NVIDIA.
The second factor is more localized. It's the classic trading strategy of "buy the rumor, sell the facts." Anticipation had built up around NVIDIA's earnings, and when the company didn't just meet but significantly surpassed these expectations, traders, having already priced in these positive results, chose to cash in on their positions.
Now, casting an eye on the technical landscape, should this be the commencement of a bearish phase for NVIDIA? If the stock price does continue its descent and breaches the green support level, where might it find its next resting place? Initial assessments point to the red uptrend line as a potential target. However, delving deeper, the Fibonacci retracement levels offer more granularity. The 23.6% and 38.2% Fibonacci levels, in particular, are crucial. Notably, the 38.2% level aligns with NVIDIA's November 2021 peak, offering a compelling support region.
In summary, while NVIDIA's recent earnings were undoubtedly a cause for celebration, the subsequent market response serves as a stark reminder of the multifaceted dynamics of stock trading. As the dust settles, investors and traders alike will keenly watch NVIDIA's trajectory, especially towards the aforementioned technical levels, to gauge its medium-term direction.