This Stock is On Breakout Watch

Shares of semiconductor stocks continue to move relentlessly higher, among them cult stock Nvidia Corporation (NASDAQ:NVDA) is wafting higher to the tune of 60% so far in 2017. Momentum will be the name of the game for NVDA stock’s next leg higher and that’s exactly what traders need to play close attention to.

In many ways, NVDA stock remains one of the better trend-following stocks of the past two years, which is to say that any bets against Nvidia, unless clearly near-term, are low probability.

To put this in some perspective, the broader semiconductors as a group and represented by the VanEck Semiconductor ETF (NYSEARCA:SMH) has seen one of the most persistent pushes higher (in a straight line) and now is higher by about 26% year-to-date.

As I always like to point out to my subscribers and faithful readers of this here daily column, stocks are a very highly correlated asset class, which is to say that about 80% of stocks will be up on any given “rally” day for the broader market, and vice versa.

The positive correlation among stocks is even more pronounced within sectors or stock groups such as the semiconductor group.

As such, when I see such a well-defined uptrend in the SMH ETF, it is difficult to be anything but bullish through the lens of trend following on something like NVDA stock.

On the multi-year chart, note that Nvidia stock over the past nine months has seen two well-defined consolidation period. The first one ended in this past May, the second one the stock arguably remains within.

This current consolidation period started in early June; and while NVDA stock has since pushed marginally above the June highs, it in my eye is not yet pronounced enough to call it a breakout.

NVDA Stock Charts

Moving averages legend: red – 200 week, blue – 100 week, yellow – 50 week

On the daily chart, we see that NVDA stock has been holding its yellow 50-day simple moving average as support and has well-defined horizontal resistance around the $173 – $174 mark, i.e. the August highs.

From a momentum perspective, the MACD oscillator at the bottom of the chart is just beginning to show a little sign of life, but with the stock not yet having cleared past the aforementioned horizontal resistance area, is still fairly flat.

Patience remains the name of the game for breakout traders in NVDA stock but a break above $174 could lead to the following upside price targets, one after another: $180, $185 and $190.

Moving averages legend: red – 200 week, blue – 100 week, yellow – 50 week

— Serge Berger


Source: Investor Place