Semiconductors are once again getting a lot of hype from Wall Street, and many industry stocks are getting upgrades from analysts. No wonder many of the semiconductor stocks surged higher. All you have to do is pull up a chart of the iShares Semiconductor ETF (SOXX) and you will see how stocks in the industry have performed. Stocks like Nvidia (NVDA), Advanced Micro Devices (AMD), Taiwan Semiconductor (TSM) and Micron Technology (MU) are all recovering strongly today (January 23, 2023). But how much upside momentum do semiconductors still have after their big move?
As an example, consider the daily chart of NVDA (see below). From a technical point of view, a few key points are surfacing.
GRAPH 1: NVDA STOCK CHART ANALYSIS. The stock is trading above its 200-day moving average, the SCTR line is trending up, and volume is also trending up. But the stock is hitting a resistance level. Will it pull back or break above the resistance level and move higher?Chart source: StockChartsACP. For educational purposes only.
Is NVDA a purchase?
- The stock price is above its 50, 100 and 200 day price Moving averages (MAs).
- NVDA stock price is testing a significant resistance level around $192. If you look back to August 2022, you’ll see that the stock price reached this level twice before trading lower. On August 15, 2022, the stock rebounded from $192 and fell to its October 2022 low. Since then, NVDA’s stock price has risen. It is now back at that key resistance level. Will the stock price break above it or will it go down?
- the SCTR line is at a respectable level of 84 and looks like it could trend up.
- Trading volume on up days is higher than average.
In view of the above points, the share price may fall. If one occurs, it can be a good buying opportunity. If the stock continues to climb, breaks above $192 and breaks through, you could place a buy order with a stop around $192.
The next resistance for NVDA’s stock price is around $200. A break above it could take it to the $230 level, then $290, after which it would sit around $340, its all-time high. The stock has the potential to move up like many other stocks that have taken a beating, but watch out for the MAs. The 50-day ma could act as a support level on a pullback. Also keep an eye on the 200-day MA, which is still sloping down. It would need to surge higher to confirm an uptrend for the stock.
There is a lot of optimism in the stock market, but while it’s nice to see your trades doing well, don’t take anything for granted. If you are considering trading NVDA, remember to add the chart to one of your chart lists and set alerts for the various support and resistance levels you see on the chart. This will alert you to key entry and exit levels, making you a more informed trader.
Jayanthi Gopalakrishnan is Director of Site Content at StockCharts.com. She spends her time creating content strategies, providing content to educate traders and investors, and finding ways to make technical analysis fun. Jayanthi was Managing Editor at T3 Custom, a content marketing agency for financial brands. Prior to that, she was senior editor of Technical Analysis of Stocks & Commodities magazine for over 15 years.
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