Will NVDA save the rally?
As anticipated on May 14th, the stock market was showing overheated conditions: the market had set a fresh gap, oscillators were overbought, and candlesticks began to show indecision. The bearish reversal thesis was further documented with additional indicators on May 17th for the $S&P 500(.SPX)$ $NASDAQ 100(NDX)$ $Dow Jones(.DJI)$ $iShares Russell 2000 ETF(IWM)$ $VanEck Semiconductor ETF(SMH)$ and individual stocks like $Apple(AAPL)$ , with consolidation warnings issued for $Tesla Motors(TSLA)$ $NVIDIA(NVDA)$, and other specific stocks. Reading those publications and the technical indicators used to time the bearish reversal is educational, here are the links:
Choosing the right technical indicator is key to analyzing price action probabilities. This is where I bring my experience, because no single technical indicator is accurate every time. To maximize the probability of success, I add support and resistance levels. These levels, once breached or consolidated, help you validate both bullish and bearish theses.
Technical analysis is incredibly helpful for timing the market. Long-term investors, for instance, can greatly benefit from major bullish signals, such as the setups highlighted five weeks ago for Bitcoin, Tesla, and the broader market. Similarly, the bearish signals posted in February for the entire market proved invaluable, as mitigating a 30% decline in the Nasdaq 100 is always a welcome outcome. I'm not suggesting a perfect sell at the top and buy at the very bottom, but selling $SPDR S&P 500 ETF Trust(SPY)$ or $Invesco QQQ(QQQ)$ on February 21st when the central level was breached, and buying on April 23rd when it was recovered and a breadth thrust was triggered on Apr 24th – also posted here – would have been very beneficial.
I devised the chart below so you can analyze the price action during the last 10 years versus the 200-day moving average. The red arrows highlight false breakouts above that line, and the green arrows highlight the false breakdowns before the market bounced and continued the uptrend. The fact that there is a gap acting as a magnet for SPX at $5,691 ($567.5 for SPY), NDX $20,203 ($491.5 for QQQ), and so on for individual securities like NVDA, $Amazon.com(AMZN)$ , $Meta Platforms, Inc.(META)$ , and others, suggests that the 200 DMA will be breached next week. The chart presents that a breach is not a guarantee of a new trend, and as I present in the S/R levels educational content, the levels can be breached temporarily so any risk control must consider some distance from the levels, and/or the completion of candles in the daily, or even in 4H or 2H timeframes.
Is a breach of the 200DMA a motive of concern? It is definitely something to watch, I have written what is the direction that recent events favor the most after this pullback, and also the fact that stomaching pain with conviction is something avoidable when using the S/R Levels, which triggered the sell validation on Wednesday when $5,901 was breached with conviction for SPX, and so on for other indices and stocks.
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