NVIDIA Corporation (NVDA) shares rose more than 5% on Thursday amid optimism surrounding U.S.-China trade talks. Last week, China offered to reduce its trade surplus to zero by 2024 by boosting imports. Trade negotiations are set to resume on Jan. 30 when China's top economic emissary Liu He visits Washington. A breakthrough would be significant for the semiconductor industry, which exported more than $6 billion worth of goods to China in 2017.
The trade optimism offset concerns about a slowdown in China affecting demand. Weak guidance from Taiwan Semiconductor Manufacturing Company Limited (TSM) earlier this week caused some concern, but investors appear optimistic that sales will pick up in the second half of the year. ASML Holding N.V. (ASML), a Dutch chip-tooling company, also told Reuters that Chinese demand for chip manufacturing equipment hasn't waned, which could be a sign that the slowdown is temporary.
NVIDIA shares are trading 46% off of their 52-week highs made in early October after the company reported worse-than-expected third quarter financial results. In addition, NVIDIA cut its guidance, citing excess channel inventory following the cryptocurrency boom.
From a technical standpoint, the stock has been on a steady uptrend since the beginning of the year, moving past pivot point resistance and the 50-day moving average at $151.81. The relative strength index (RSI) moved to neutral levels with a reading of 57.60, while the moving average convergence divergence (MACD) remains in a bullish uptrend. These indicators suggest that the stock has room to run as it breaks out from the 50-day moving average and reaction highs.
Traders should watch for an extended rally to R1 resistance at $163.97 near prior highs made in December of last year. At that point, the stock could consolidate between those levels and trendline support before moving higher. If the stock breaks below trendline and 50-day moving average support, traders could see a move to pivot point support or 52-weeks lows, although that scenario appears less likely to occur.
The author holds no position in the stock(s) mentioned except through passively managed index funds.