While most of the Magnificent 7 names are achieving all-time highs in December 2024, one notable outlier has been showing signs of weakness for months. While the stock has not broken down yet, declining volume readings, as well as bearish momentum divergences, suggest it’s only a matter of time before a breakdown occurs. Today we’ll analyze the charts of Nvidia (NVDA) , review how the technical picture has changed in recent weeks, and identify potential downside targets for this former high-flying semiconductor company. The problems for NVDA from a technical perspective have been building for some time. On the weekly chart, we can see that while the price was making new all-time highs in October and November, the RSI and PPO indicators were both sloping downwards. This indicates that while the price has been moving higher, it has been doing so on weaker momentum readings. Generally speaking, I assume that long-established uptrends should be considered “innocent until proven guilty.” While the long-term uptrend in Nvidia appears to still be in place, the weakening momentum characteristics on the weekly chart suggest we are nearing the end of the uptrend phase. Levels to watch We can see a similar bearish momentum divergence on the daily chart, with the RSI sloping downwards since October despite higher price action. After peaking just above $150 in November, Nvidia has now logged a lower high in early December around $145. I would consider the price action over the last six to eight weeks as a consolidation phase, with a fairly stable support level around $132 and resistance around $150. With this sort of technical setup, the best approach is to wait for a decisive breakout in either direction. A push above resistance at $150 would indicate an influx of buying power and potential for a resumption of the uptrend. The more likely scenario, given the bearish indications on the weekly chart, would be a downside break of $132. Next, let’s review the volume trends to see if there are any signs of distribution which could corroborate the breakdown thesis. Here we are using the Chaikin Money Flow indicator to measure trends in volume over time. Note how the indicator has pushed well above the zero line during bullish trend phases in May and October, and compare that to the current configuration where the CMF is basically hovering around the zero line. The lack of volume support confirms a consolidation phase for Nvidia, suggesting that buyers and sellers are basically in equilibrium with neither side taking control. This could be the most important chart to watch to gauge a potential breakdown, because a negative CMF reading would suggest a new distribution phase has begun. How low could it go? If we do detect a confirmed breakdown of support around $132, what sort of downside price objective could we expect? One of the classic measurement techniques involves taking the height of a price pattern and calculating a similar move post-breakout. In the case of NVDA, that would suggest about a 13.7% decline below $132, yielding a downside objective around $114. This downside price target lines up quite well with the 200-day moving average, which Nvidia has actually not touched since January 2023! If and when NVDA completes that pullback to the 200-day moving average, we would need to reevaluate the price, momentum, and volume readings to determine a potential future path. But given the long-term strength on the weekly chart, this could provide an opportunity to accumulate one of the top AI names at a deep discount. -David Keller, CMT marketmisbehavior.com DISCLOSURES: (None) All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, NBC UNIVERSAL, their parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL’S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.
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