Since posting fiscal fourth quarter results on February 9th, NVIDIA Corp. (NVDA) has been falling. Yesterday, shares fell by nearly two percent to $107.13. On February 10th, a day after the company announced its results, shares traded as high as $120 but have since fallen by nearly 11%. This may be just the beginning of a further pullback in the shares. (See also, NVIDIA Beats on the Top and Bottom Line)
It appears that fundamentals are no longer driving NVDA; technicals and momentum took over months ago, maybe even as far back as mid November. The chart below shows the trend line in November shifted into high gear. Towards the end of 2016, investors and traders were moving into the high-performance names for either quarterly or year-end window dressing. Most likely, they were looking to take advantage of momentum in the name. When NVDA topped out at $120 last week, it was the second time it reached that level in the recent timeframe, with the prior time being December 28th, 2016. The earnings report sucked the momentum out of the stock. Not because the company had bad earnings, it didn't. The results simply didn't justify a stock trading at a 2018 Forward P/E of 41. Back on December 21st, it was clear that NVDA's success could get in its way, and that is what we see playing out now. (See also, Which Large-Cap Tech Stock Popped More Than 200% in 2016?)
So where will NVDA shares go next? Lower, most likely.
(Interactive Brokers TWS)
There are a lot of things going on in this chart. First, there is the double top formation at the $120 level, which is extremely bearish. Second, there is an ascending triangle formation from the middle of November through to the present, also bearish. Third, there is the stock breaking its most recent uptrend line, also bearish. Finally, the gap created in the middle of November, which is also bearish. That's four bearish signals in one chart.
Also, as of January 31st there were 36.2 million shares short, which represents about 9% of the approximately 525 million share float. If you know that momentum goes both ways, than you know the joy or pain of trading all depends on what side of the trade you're on.