Nvidia Stock Analysis: Expectations of a Pullback as NVDA Trades Lower.
Meta Description: Analyze Nvidia’s stock performance and anticipate a potential pullback based on technical indicators and market trends. Explore the impact of Federal Reserve Chair Powell’s testimony and Barclays’ endorsement of Nvidia as a top AI pick.
Nvidia Stock Analysis: Friday’s Pre-Market Update
Nvidia (NVDA) is showing signs of preparing for a pullback, as observed in Friday’s pre-market trading. The Relative Strength Index (RSI) indicates that NVDA is still trading in overbought territory, and the recent market decline can be attributed to Federal Reserve Chair Powell’s testimony. Additionally, Barclays has named Nvidia as its preferred choice for the AI revolution.
NVDA’s Performance and Market Conditions
In the current four-session trading week, Nvidia experienced a 10.1% gain last week, resulting in an overall increase of 0.8% for this week. However, despite posting a respectable gain on Tuesday, Nvidia traded lower on Wednesday and Thursday as the tech-heavy NASDAQ Composite declined by 0.43% for the week.
Friday’s Pre-Market Outlook
The pre-market activity on Friday indicates a more significant decline. At the time of writing, Nvidia stock is down 1%, and NASDAQ 100 futures are down 1.2%.
Impact of Powell’s Testimony
Federal Reserve Chair Jay Powell’s testimony before Congress this week, emphasizing the intention to maintain high interest rates, has negatively influenced the market sentiment. The market reacted to Powell’s expectation of two more interest rate hikes this year, contrasting the anticipation of a pause or a single hike in the second half of 2023.
“Higher for Longer” Interest Rate Regime
The market anticipates a “higher for longer” interest rate regime, which will likely exert pressure on growth stocks. With higher risk-free rates expected until 2024, future profitability is perceived as less valuable compared to a lower-rate environment. Consequently, growth stocks, including Nvidia, may face challenges.
Barclays’ Endorsement of Nvidia
Barclays bank analysts named Nvidia as the top AI pick, surpassing Microsoft. Barclays highlights Nvidia’s revenue growth expectations, projecting an increase from $7.2 billion to $11 billion in the current quarter. Nvidia is seen as a key player in the foundational hardware segments of the AI value chain, with analysts predicting substantial sales growth in the coming years.
Technical Analysis and Bearish Indicators
Nvidia’s stock has formed a rounded pattern over the past five days, indicating a potentially bearish setup. The RSI has consistently been in overbought territory since May 18, suggesting that the stock will eventually trade lower to normalize the RSI to neutral levels (around 50). If the support at the $373 to $378 range fails to hold, it may lead to further decline, as this area has previously provided stability.
Nvidia Stock Forecast
Based on technical indicators and market trends, there is an expectation of a potential pullback in Nvidia’s stock. Traders should closely monitor the stock’s performance and adjust their strategies accordingly. Keep an eye on key support levels and stay informed about market developments to make informed trading decisions.