NVIDIA Corporation (NVDA) reports earnings after Thursday's closing bell, with analysts expecting a profit of $1.53 per share on $3.0 billion in first quarter 2020 revenue. The stock rallied 7% after NVIDIA beat top- and bottom-line estimates in February, topping out four sessions later ahead of a 136-point sell-off into mid-March. The subsequent uptick recovered 100% of those losses into May before breaking out to an all-time high last week.

The graphics card giant has benefited greatly from stay-at-home and quarantine orders, with millions of idled Americans and Europeans having plenty of free time to upgrade their computers and play video games. The broad-based PHLX Semiconductor Index (SOX) has acted well since the March low as well, but NVIDIA is leading the way, outperforming other chip stocks like it has since the middle of the last decade.

The trend advance could book substantial upside in coming months, with the completed breakout above 2018 resistance generating a measured move target near $450. A pullback to $300 or so could offer a low-risk buying opportunity before reaching that lofty peak, so investors and traders who missed the breakout may want to keep this rocket ship on their watch lists, waiting for a reversal that shakes out weak-handed momentum buyers.

NVDA Long-Term Chart (1999 – 2020)

Long-term chart showing the share price performance of NVIDIA Corporation (NVDA)
TradingView.com

A January 1999 initial public offering (IPO) opened at a split-adjusted $1.83 and eased into a trading range between $2.19 and an all-time low at $1.43. A November breakout generated healthy buying interest before stalling in the mid-teens in June 2020, ahead of a steep correction that relinquished more than 65% of the stock's value into year end. It broke out to a new high at the end of 2001, but the rally failed, yielding a decline that found support at a three-year low.

The subsequent bounce failed, ahead of a successful 2004 retest and double bottom that signaled a new uptrend. The stock broke out above 2002 resistance in 2007 and posted a new high at $39.67 a few months later, marking a peak that wasn't challenged for the next nine years. It held up relatively well during the 2008 economic collapse, but buying interest faded in the new decade, giving way to narrow range-bound action during the roaring bull market.

Bitcoin mania woke the stock from the dead in the second half of 2015, triggering a momentum-fueled advance that lifted NVIDIA into market leadership in 2016 and 2017. The uptrend finally ended at $293 in October 2008, giving way to a steep decline that shook out many shareholders before finding support in the $120s in December. The subsequent bounce completed a round trip into the 2018 high in February 2020, triggering a rally that failed when coronavirus deaths were reported in the Seattle metro area.

NVDA Short-Term Chart (2018 – 2020)

Short-term chart showing the share price performance of NVIDIA Corporation (NVDA)
TradingView.com

The on-balance volume (OBV) accumulation-distribution indicator returned to February 2018 resistance when the rally stalled in October and reversed into a distribution phase that hit a 52-week low one month later. It tested that level in May 2019 and turned higher, entering a sustained period of buying pressure that reached new highs in October, well ahead of price. OBV peaked with price in February 2020 and has now returned to that level, but so far at least, the indicator has failed to confirm the breakout. 

In turn, that raises the stakes heading into Thursday's post-market report because an OBV reversal after the news could presage a failed breakout or pullback that reaches the 50-day exponential moving average (EMA) now rising through $290. On the flip side, a Friday rally gap that holds price through at least one session should also lift the indicator above resistance, confirming the breakout while supporting continued upside into the $400s.

The Bottom Line

NVIDIA has broken out to an all-time high ahead of this week's first quarter earnings report, but volume still hasn't confirmed the breakout.

Disclosure: The author held no positions in the aforementioned securities at the time of publication.