close icon

Nvidia Stock Staging a Deceptive Elliott Wave Recovery

The last three months of 2018 may have been bad for stock market investors in general, but few suffered more than NVDA shareholders. Nvidia stock climbed to an all-time high of $292.76 a share on October 2nd. By December 24th it was down to $124.50, losing over 57% in less than 90 days.

So it turns out that despite its stellar performance in recent years, Nvidia is still a cyclical company. Due to the very nature of its products, the company simply cannot sustain good business results for very long. Combine this with people’s uncontrollable greed during times of prosperity and you get the perfect setup for a spectacular crash when the tide eventually turns.

The obvious conclusion for stock investors is that they should seek to buy when the price nears a bottom and sell when it is at record highs. Unfortunately, so often they do just the opposite.

Now, with Nvidia stock cut in half, is it time to start buying or stay aside in anticipation of even more weakness? NVDA’s stock price has been out of line with the company’s fundamentals for so long that it would be foolish to rely on them now. Instead, let’s try to decipher the market’s intentions with the help of the Elliott Wave chart below.
Nvidia stock price Elliott Wave forecast
The 4-hour chart of Nvidia stock shows the structure of the entire selloff from the vicinity of $293 to $124.50. As visible, it takes the shape of a textbook five-wave impulse pattern, labeled 1-2-3-4-5 in wave (1/A). One of the Elliott Wave principle’s rules states that within an impulse, wave 3 cannot be the shortest among waves 1, 3 and 5.

Here, wave 3 is definitely shorter than wave 1, but it is longer than wave 5, so there is no violation of the rule. Another rule says that waves 1 and 4 cannot overlap in price. On the chart above, wave 1 ended at $176.01, while wave 4 terminated at $174.68. No violation again.

So what useful information can we extract from this chart? According to the theory, every impulse is followed by a three-wave correction in the opposite direction, before the trend resumes in the direction of the five-wave pattern.

Since Nvidia’s impulsive decline seems complete, this means we can expect a notable recovery in wave (2/B). The resistance area near $180 – $190 looks like a reasonable bullish target. The MACD indicator gives another reason for short-term optimism by revealing a strong bullish divergence between waves 3 and 5 of (1/A).

However, even if the bulls manage to exceed $190, Nvidia stock should be viewed with a grain of salt. We wouldn’t be surprised to see Nvidia stock trading in double digits once wave (3/C) down begins. If this count is correct, the recent 57% crash did not make NVDA cheap enough.

Did you like this analysis? Our Elliott Wave Video Course can teach you how to uncover the patterns yourself!



Stay informed with our newsletter

Latest Elliott Wave analysis on different topics delivered to you weekly.

Privacy policy
You may also like:

Can Facebook ‘s Privacy Concerns Fulfill this Setup?

Facebook ‘s privacy policies are under the microscope once again. Personal e-mails uncovered during an FTC investigation reveal Mark Zuckerberg knew of the company’s problematic privacy practices. Facebook stock still hasn’t been able to fully recover from the crash in the second half of 2018, which dragged the price from $218.62 down to $123.02. How…

Read More »

JPMorgan: Risk is High After 10 Years of Bull Market

Between March 2000 and March 2009, JPMorgan Chase & Co. investors saw their holdings’ value decline by almost 78% as the stock fell from over $67 to less than $15 a share. The next ten years, on the other hand, have been a wonder to behold. JPM stock rose like a phoenix from its ashes,…

Read More »

SERV Stock Sets the Stage for a 40% Tumble

ServiceMaster Global Holdings, founded in 1929, is a cleaning and pest control company headquartered in Memphis, Tennessee. The company went public in 2014 and has delivered very generous returns for its shareholders since. SERV stock took off from $11.54 in August 2014 and climbed to as high as $56.50 earlier this month. A 390% total…

Read More »

IAC Stock ‘s Future May Not Resemble its Past

InterActiveCorp. or IAC for short, is a $19 billion media and internet services company. It is the controlling shareholder of Match Group, which in turn operates Tinder – the online dating app. IAC stock was beaten down heavily during the Financial Crisis. In March 2009, IAC stock fell to $13.23 a share, down 92.3% from…

Read More »

Humana Stock Bulls Haven’t Lost the Battle Yet

Humana (NYSE:HUM) climbed to an all-time high of $356 in early November 2018, following a rally from as low as $18.57 in March 2009. In less than ten years, the company rewarded the patience of its investors with a total return of over 1820%, not counting dividends. Unfortunately, the last six months were nothing like…

Read More »

T Rowe Price Vulnerable After Fibonacci Encounter

Founded in 1937 and based in Baltimore, Maryland, T Rowe Price is one of the largest asset management companies in the world. At the end of Q1 2019 its assets under management stood at $1.11T. That is T for trillion. Besides, T Rowe Price is also a public company which is why it is of…

Read More »

Momo Inc. – The Tinder of China Looks Promising

Based in Beijing, China, Momo Inc. operates a mobile-based social and entertainment platform. The company was founded in 2011 and became public in late-2014. The Tinder of China, as Momo is often referred to, first turned a profit in 2015 and has been enjoying strong earnings and revenue growth in the last three years. Momo…

Read More »

More analyses