Overperforming Nvidia appears overbought at current valuation

<p>For the market leader Nvidia (NASDAQ: NVDA), today’s much healthier but well-satisfied trading environment means that the NVDA share is not a gift that continues to give in the short term. Let me explain.

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It’s not Christmas, but after the extended Easter weekend, nice headlines have greeted worried investors to start the week. Reports on Monday morning show that the new coronavirus outbreak is showing signs of supporting a successful flattening of the curve in the US and globally.

At the same time, oil producers led by Saudi Arabia and Russia also concluded a welcome agreement on production cuts. But the markets are not gathering. Monday’s positive drivers are on the heels of last week’s massive 12% rally in the S&P 500 and much-needed price confirmation for an emerging bull market.

The problem in the short term is that the broad-based large-scale clockwork has quickly turned from a record-breaking (and oversold) corrective leap to an overbought rally after winning almost 28% from its low bear market exactly three weeks ago.

And for the market leader Nvidia, whose shares have risen by almost 41% and easily surpassed both the major indices, as well as the semiconductor friends of large companies Intel (NASDAQ: INTC) and Advanced Micro Devices (NASDAQ: AMD), buy the NVDA share today. even more dubious in the short term, both off and on the price table.

NVDA Stock Weekly Chart

Source: Chart of TradingView

Nvidia’s long – term growth history is convincing. After all, chip equipment is well positioned to take advantage of secular trends in artificial intelligence, data centers, autonomous driving and gaming.

And no one denies it. But right now it is not time for investors to chase the NVDA share’s price momentum either. I’m not alone in thinking about it either.

Investment store Craig Hallum issued a research note this morning and lowered Nvidia’s shares from “Buy” to “Hold”. The company also dropped its price target to $ 300 from $ 325 for ‘valuation issues’ linked to a more balanced risk / return equation after rallies in Nvidia and revised down 2021 sales estimates for Nvidia’s gaming market.

Analyst Richard Shannon advises investors to wait for a more attractive entry into the NVDA stock. And in this strategist’s observation, the warning is also solid tactical advice in the price chart in today’s greatly improved market environment, given that the environment is overbought in the short term.

Technically, the concern is Nvidia’s bearish, star – shaped candlestick formation developed over the past week. The pattern extends above the 62% retracement level and the stock‘s previous upward line. At the moment, that combination should act as price resistance and favor lower prices.

The conclusion, if NVDA confirms the turnaround by trading below last week’s lowest value of $ 252.93, the chances of creating a quick but healthy opportunity to pick up stocks in the range of $ 218 to $ 230 are greatly increased. This area marks 50% to 62% retracement of last month’s rally. And given the circumstances and the Nvidia price chart, it looks infinitely more welcoming and without being too desirable versus terribly chasing stocks today.

Disclosures: Investment accounts managed by Christopher Tyler do not currently hold any positions in any of the securities mentioned in this article. The information provided is based on Christopher Tyler’s observations and is intended for educational purposes only; whose use is the responsibility of the individual. For more market information and related thoughts, follow Chris on Twitter @Options_CAT and StockTwits.