It may be time for investors to sell Nvidia on the next bounce, according to the charts

Published Mon, Apr 15 20242:55 PM EDT

Market leader Nvidia (NVDA) has seen its steep uptrend stall, giving way to a consolidation phase that has had a hold since the second week of March. Let's see what the charts say to do from here. Last week, NVDA saw a successful test of support defined by its March gap, the 50-day moving average, and the daily cloud model. The daily stochastics have turned higher from oversold levels, supporting a bigger oversold bounce in the near term. In contrast to the daily stochastics, there is downturn in the weekly stochastics from overbought territory. This increases risk that a rebound in NVDA will give way to a deeper pullback, with a corrective phase potentially unfolding just in time for the seasonal adage of 'sell in May, and go away' to manifest itself in investor behavior. This would imply that investors can hold NVDA, for now, but may want to reduce exposure after a bigger bounce. Final resistance on the chart is near $974, but we would not rule out a move to the psychologically significant $1,000 level before the relief rally fails. Nvidia bounced at one point Monday, but was last down about 1.5% to about $868. NVDA is the third-largest holding in the S & P 500 Index with a weighting of roughly 5%, so a short-term bounce would be a near-term positive for the benchmark. We feel market sentiment has been tied to NVDA this year, even more so than yields, noting NVDA's most recent pullback coincided with a pullback in sentiment gauges like CNN Money's Fear & Greed Index. While a short-term bounce in NVDA may temporarily improve sentiment, the 10-day moving average of the Fear & Greed Index has rolled over in an indication that sentiment should deteriorate further after a temporary boost, perhaps for an oversold reading this summer. —Katie Stockton with Will Tamplin Access research from Fairlead Strategies for free here . 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