Take Aggressive NVIDIA Profits

NVIDIA Corp. (NVDA) posted outstanding gains last week, lifting more than 25% to a four-week high. The turnaround erupted at the 200-day moving average, raising hopes for a sustained bottom and end of the downtrend that started in November. However, long-term cycles are refusing to cooperate, suggesting a buzzsaw of selling pressure as price action navigates the 270s and 280s.

Mixed Semiconductor Industry Outlook

PHLX Semiconductor Index is flashing the same message, squeezing higher after a rapid descent to a 10-month low. Supply chain issues persistent throughout the industry while the Russian invasion will make it harder to obtain some fabrication materials. China’s obsession with Taiwan isn’t helping matters because that small nation dominates the world’s foundry market, building chips for tech giants that include NVDA, Apple Inc. (AAPL), and Qualcomm Inc. (QCOM).

Cowen analyst Matthew Ramsay examined the company’s long-term growth last week, noting “As NVIDIA has transformed from a GPU hardware company to an accelerated computing HW/SW platform provider, and now we would argue into an application-specific compute (including NPU and CPUs) and software ecosystem, sizing these opportunities has inevitably become more complex… Given the significant pullback YTD and the correspondingly more attractive valuations, we make NVIDIA our new top pick”.

Wall Street and Technical Outlook

Wall Street consensus stands at an ‘Overweight’ rating based upon 30 ‘Buy’, 6 ‘Overweight’, 6 ‘Hold’, 1 ‘Underweight’, and 2 ‘Sell’ recommendations. Price targets currently range from a low of $210 to a Street-high $400 while the stock closed Friday’s session about $75 below the median $350 target. Targets and ratings have barely budged in the last three months because Omicron and Ukraine have made it harder for the stock to resume its long-term leadership role.

NVIDIA settled near 150 in September 2020 and carved a narrow trading range, ahead of a May 2021 breakout that hit an all-time high at 346.47 in November. It broke down from a small head and shoulders top in January, entering a correction that reached the 200-day moving average a few weeks later. The stock has been testing that support level for the last two months, lifting weekly relative strength readings into a buy cycle. However, the bearish monthly cycle remains firmly in place, forecasting mixed action into the second quarter.

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Disclosure: the author held no positions in aforementioned securities at the time of publication.