Nvidia (NVDA) shares are under scrutiny as the company prepares to release its earnings report after Wednesday’s closing bell. The chipmaking giant is anticipated to report a 73% increase in fourth-quarter revenue year-over-year and a net income of $21.08 billion, compared to $12.84 billion in the previous year.
Nvidia shares have traded flat for the year but have increased by 12% this month as of Friday’s close. Analysts continue to express bullish sentiments regarding the stock, driven by significant spending on AI infrastructure by big tech hyperscalers. Despite the positive momentum, the stock saw a decline of 4.1%, closing at $134.43 on Friday amidst a broader sell-off on Wall Street.
Technical analysis of Nvidia shares
Nvidia shares have been consolidating within a descending channel since mid-December, characterized by declining trading volumes. Recently, a bearish engulfing pattern formed on the chart, indicating a potential downward movement as the earnings date approaches. This same candlestick pattern had previously emerged on two occasions since the stock reached its record high in early January, both times leading to further declines.
The relative strength index (RSI) has mirrored the share price, exhibiting lower highs since the initiation of the descending channel, which suggests a decrease in buying momentum.
Key price levels to monitor
Several critical support and resistance levels are notable for Nvidia’s stock chart. The first support level to watch is around $130, where shares could find support near a trendline connecting the prominent August peak with troughs from December and January. If the stock falls below this level, it may drop to around $113. This area aligns with a recent swing low and corresponds to a historical trading range dating back to May 2023.
In case of a substantial post-earnings downturn, the $102 level may become significant, coinciding with the opening price of the late May breakaway gap and a cluster of prices near the August and September lows.
On the resistance side, a breakout above the descending channel’s upper trendline could lead to an attempt to reach the $153 level, which corresponds to the stock’s all-time high (ATH). Utilizing the measured move technique, investors can project a bullish target above the ATH. This involves calculating the width of the descending channel and adding that amount to the pattern’s upper trendline. For instance, adding $32 to $142 suggests a target of $174, representing nearly a 30% increase from Friday’s closing price.
Despite facing challenges from valuation levels in comparison to other tech giants, such as Tesla (TSLA) trading at 121 times forward earnings and Amazon (AMZN) at 36 times, Nvidia’s position remains robust.
Market analysts, including KeyBanc’s John Vinh, assert that Nvidia is uniquely positioned to capitalize on the ongoing growth of AI and machine learning within data centers. Vinh notes that Nvidia has established significant barriers to entry through its CUDA software stack, limiting competitive threats and affirming its dominance in rapidly expanding cloud and enterprise workloads.
As Nvidia’s earnings report approaches, options traders forecast a potential 7.7% price movement following the announcement, compared to an average gain or loss of 9.2% observed after the past eight quarterly reports. The overall fluctuations in the S&P 500 during these periods averaged 0.8%, contrasting with a mean daily move of 0.6% over the past two years.
A variety of upcoming market catalysts, including tariff negotiations and government funding deadlines, could contribute to increased volatility in the weeks following the earnings release.
Disclaimer: The content of this article is for informational purposes only and should not be construed as investment advice. We do not endorse any specific investment strategies or make recommendations regarding the purchase or sale of any securities.
Featured image credit: Nvidia
