Is Nvidia gearing up for pre-earnings breakout?

Februar 10, 2021 10:00

Shares in Nvidia surged nearly 150% higher in 2020, helped by the boom in cryptocurrencies. The company has experienced phenomenal growth has its graphics processing units (GPUs) are used heavily by cryptocurrency miners. 

Reports have even circulated that the company could start to make specialised cards for cryptocurrency miners. However, Nvidia’s executive vice president and chief financial officer, Colette Kress, recently commented that the demand from the gaming sector is much larger than demand from crypto miners. 

In the bigger picture for the business, the company’s $40 billion acquisition of UK chip designer Arm has investors on edge as it comes under scrutiny from UK and EU regulators. Nvidia’s rivals have called for the deal to be blocked. 

This has created a trading range for the company’s share price at the top of a very long-standing trend, as the chart below shows:

Source: Admiral Markets MetaTrader 5, #NVDA, Weekly - Data range: from Oct 29, 2013, to Feb 9, 2021, performed on Feb 9, 2021, at 8:30 pm GMT. Please note: Past performance is not a reliable indicator of future results. 

 

The trading range for the company’s share price comes before the release of its last quarterly earnings announcement which is due on 24 February. The uncertain outlook regarding the acquisition has also caused some uncertainty in the stock’s price. 

Looking at the range more closely on the daily chart shown below, it’s clear to see the ascending triangle pattern that has formed. This pattern typically exhibits a series of higher lows which create an ascending trend line, as well as a series of rejections at a fixed price level creating a horizontal resistance line. 

Some traders may choose to trade in-between the ascending triangle formation and off the horizontal resistance line and ascending trend line. As the pattern represents a bullish formation, some traders will wait for the market to break out from upper resistance and may position themselves early on. 

Source: Admiral Markets MetaTrader 5, #NVDA, Daily - Data range: from May 6, 2020, to Feb 9, 2021, performed on Feb 9, 2021, at 8:35 pm GMT. Please note: Past performance is not a reliable indicator of future results. 

 

A break from the $583.00 price level, could see the stock run higher by at least $100 which is the size of the ascending triangle formation when it first developed. 

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