Will Nvidia's Run Up Last

Will Nvidia’s Run Up Last
June 4, 2023

Short answer...

Since ChatGPT 3 came out late last year, Artificial Intelligence has been all the rage. AI this. AI that. Nvidia has been at the center of the AI hype because they make the semiconductor chip that powers AI. So is #NVDA going to continue its run beyond $400 a share?

No.

I’ll keep this short or try to.

Nvidia has been driven by the fact that it does provide the best chip or only chip products that powers AI. But its the GameStop effect that has driven Nvidia to the $400 price tag it has achieved this week.

Here’s how it works. Options have become the big go to for the Reddit and momentum traders. Short term Call options are bought on NVDA each day by the traders or individual investors. When a Call or Put is bought, the Market Maker that sold it to you or who ever has to hedge that position. So they will buy an index such as the S&P500 or Nasdaq 100 which intern drives the price of the Index higher which then drives the underlying stocks higher. One of them being Nvidia. Add the individual option and stock buying going on with NVDA and you have a very concentrated tech rally that has represented 95% of the S&P500’s returns this year. Once that liquidity subsides due to other outside variables, the index and Nvidia will go down.

Lets look at some charts

This is a weekly chart. Weekly charts clear the daily static of a daily chart in my opinion.

Slow Stochastics is in above 80. This is a sign of potentially a overbought stock.
Last weeks close was lower then the high for the week which tells me that there where not enough buyers to support it to go higher.
The Money Flow Index supports the subsiding of the money flow into NVDA. As the Money Flow declines, so will the stock.
The On Balance Volume is still headed north, yet that could mean selling into a upward rising price.
Look at this weeks Volume. It closed lower then last weeks volume. A sign of subsiding positive money flow.

Daily Chart

This is a Daily chart.

Slow Stochastics has broken below 80 and has met the 50 mark. You can see that its hit this area two previous times this week. Sign of sideways movement.
The GAP between $320 and $380 at some point will be filled. This is the same thing that happened to TSLA.
Money Flow Index has been fluctuating within a range for some time. A sign of the option buying that I spoke about earlier? Most likely.
On Balance Volume is consolidating and likely will break below the 13 day EMA.

What’s Next?

In my opinion, not advise or a recommendation, NVDA is head towards $320 in the near future. If what I believe could happen with the US and Global Economy does come true in the next twelve months, NVDA at $192 to $235 looks like a deal to me.

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