Technicals vs Fundamentals: The Ultimate Conflict
๐๐๐If a company reports stellar earnings (fundamentals) but the stock creates a massive "Bearish Engulfing " candle (Technicals) what do you do?
A classic recent example is $NVIDIA(NVDA)$
Stellar Fundamentals
AI Dominance : $NVIDIA(NVDA)$
Strong Growth: NVIDIA consistently reported blockbuster earnings , with revenue growth exceeding analyst expectations.
Bullish Consensus: Wall Street Analysts maintain overwhelming "Buy" ratings and high price targets, citing strong demand and an attractive P/E ratio relative to its growth story.
The Technical Analysis Tells A Different Story
In October the stock formed a long upper shadow on a candlestick right at its 52 week high of USD 212.19. This is a powerful bearish reversal signal , indicating that "smart money" was selling into the strength.
When this pattern appears after the stock has been trending upwards for a while it is a warning sign that momentum is shifting.
Overbought Conditions: Momentum indicators were showing bearish divergences, meaning the rally lacked the internal strength to continue.
The Lesson
The Technical Indicators told us the good news was already priced in. When the fundamentals confirmed the good news, the short term traders followed the chart , not the P/E ratio, creating a classic "sell the news" event.
Price action is the market's voice and right now it is telling us to be vigilant. In the short term it is important not to ignore the technical indicators.
In the arena of high stakes investing, fundamentals tell you the why but technicals tell you the when. In a market where narratives change in n a heartbeat , the trend is not just your friend . It is your objective guide. So observe carefully , respond thoughtfully and never let a good story blind you to a bad chart.
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