Even the mighty NVIDIA (NVDA) was not able to withstand the thrashing in the tech sector today and the share price dropped more than 4% in the session. There were, however, technical indications leading up to today’s drop that suggested a pullback was in the cards.
The daily chart shows the stock beginning the year by consolidating in a three month triangle pattern before breaking out in May and continuing its long-term trend higher. In June it began trading in a rising triangle pattern characterized by converging trend lines. It broke below the rising triangle support line today and closed near the low of the session, forming a large bearish engulfing candle. Some of the early warning signs were moving average convergence/divergence making a lower high last month in bearish divergence to price, and Chaikin money flow crossing below its 21 period signal average. The Bollinger bandwidth reading is at a level that suggests further volatility and momentum and money flow indications suggest continued downside.
The first level of support is the $159 area which is currently intersecting with the rising 50 day moving average, and below that is the $140 level where the stock price found support from its June pullback.