Nvidia stock price forecast – Price targets - Technical analysis
In today’s video we followed up on the Nvidia (Nasdaq: NVDA) video from yesterday and the Flag pattern targeting $160. That Flag pattern failed, and today we examined the failure in detail.
Technical analysis Bible
The reference manual for performing Technical analysis is the universally acclaimed, “Technical Analysis of Stock Trends,” by Robert D. Edwards and John Magee. This book was originally published in 1948 and it is widely considered to be the Bible of Technical analysis. Still relevant after 75+ years in print, the manual is currently in its 11th edition.
As part of our examination, we reviewed the characteristics of Flag and pennant patterns and how to use them accurately.
From “Technical Analysis of Stock Trends,” we find these characteristics of a valid Flag and pennant patterns:
- The Flag pattern will have a nearly vertical or steep pole
- Volume will decline considerably during the consolidation phase when the Flag or Pennant is being formed
- The pattern occurs most commonly and is most reliable in uptrends
- According to the authors, the pattern is "among the fastest and most profitable forms of market action"
- Before entering a trade based on the pattern, wait for confirmation which is an upside breakout on rising volume
- Volume will be increasing as the Flag pole is formed
- Trade entry can be made while the Flag is being formed, but only do so with a tight stop
- To determine a price target based on the pattern, remember that "the flag flies at half-mast"
Failure of the Nvidia Flag and pennant pattern
After reviewing these characteristics, we re-examined yesterday’s analysis to see where we got it wrong. In the video we examine each of the characteristics of Flag and pennant patterns as they apply to our Nvidia price prediction of $160.
In hindsight it is obvious that we forgot to pay attention to volume during the Flag pole portion of the pattern. Instead of rising, volume in Nvidia stock was actually falling during this period.
And, as we have pointed out in several recent videos, volume action in many equities and the equity indexes as well has been inconsistent with a bull market in stocks. Instead of rising volume as price increases, we're seeing falling volume or flat volume. And that is not bullish.
It’s almost as if the Stock markets are currently floating higher on hype and hopium related to AI technology.
Flag or Pennant vs Energy Coil
I learned Andrews pitchforks methodology from Dr. Timothy Morge, a professional trader and consummate educator. Dr. Morge learned about Andrews pitchforks directly from the creator, Dr. Alan Andrews, and he used the methodology quite profitably throughout his 40-year career.
Dr. Morge never talked about price patterns. He looked at financial markets in terms of what he referred to as market geometry, which includes support and resistance areas, trend lines, price channels, and, of course, Andrews pitchforks.
He also emphasized the importance of energy and how it relates to price action.
One of his valuable lessons was on what he called Energy Coils. In a Flag and pennant pattern, Dr. Morge would have referred to the Flag portion of the pattern as an Energy Coil.
He taught that during an Energy Coil price is gathering energy for its next move. The name ‘Energy Coil’ came from the idea that as price consolidated, it was winding a coil tighter and tighter.
When the coil releases, the gathered energy will be expressed in impulsive price action.
Dr. Morge pointed out, however, that it is not possible to predict the direction that price will take upon exiting the Energy Coil.
In the Nvidia Flag pattern we can see that price consolidated for nearly two trading weeks before exiting the Flag or Energy Coil.
Instead of breaking to the upside as we had predicted, price broke impulsively to the downside and invalidated the Flag and pennant pattern.
Nvidia stock price forecast
Since the Flag pattern has failed, what we're looking for now is where price might find support during its downward movement.
Watch the video to see how we examine potential support levels and price targets using these techniques:
- Moving averages
- Fibonacci retracement levels
- Round numbers
- Support and resistance zones
Nvidia earnings report
In their Q2 earnings report, Nvidia actually exceeded analyst forecasts. Usually that serves as a reason for investors and traders to take a stock higher. In this case, however, NVIDIA headed lower after the earnings announcement and company conference call.
TradingView is suggesting is that the markets didn't like the news, or the lack of news, about the upcoming launch of the Nvidia Blackwell chip. There wasn't a lot of detail provided about the challenges that NVIDIA has had and is facing with the Blackwell chip.
The company just acknowledged that there was rework required, but they still expect to be shipping this chip in Q4 and have several billion dollars worth of revenue from sales of the chip.
Our interpretation of the earnings report and conference call was positive, which gave us confidence in predicting an upside target. Obviously, the markets reached a different conclusion and took the Nvidia stock price lower.
Some analysts have suggested that investors and traders were so used to Nvidia earnings totally blowing away analyst expectations, so they were disappointed that Nvidia didn’t tell everybody, “Hey, our stock price is heading to the moon!”
Nasdaq index chart
We concluded today’s video with a quick look at the equity indexes.
The most important behavior, in our opinion, is the fact that Nasdaq left an open gap overhead during its last rally.
Failing to fill this gap is an indication of weakness. Price was not strong enough to fill that gap, and instead, the index rolled over and headed lower.
Watch the video for more in-depth analysis of the Nasdaq index, the S&P 500 index, and, of course, the Dow Jones index.
https://satoritraders.com/blog/nvidia-stock-price-forecast-price-targets
