Nvidia Pops Higher Within Bear Flag Pattern: Is The Chipmaker Heading Below $400?

Zinger Key Points
  • Nvidia is trading in a possible bear flag pattern within a downtrend.
  • The measured move of the bear flag is about 5.2%.

Nvidia Corporation NVDA was popping up slightly higher Monday after the company hinted at DLSS 10 delivering full neural rendering.

The move higher was taking place on lower-than-average volume, however, which suggests the bulls are weak and that Nvidia's tick higher is likely consolidation.

Nvidia is also settling into a possible bear flag pattern on the daily chart. The bear flag pattern is created with a steep drop lower forming the pole, which is then followed by a consolidation pattern that brings the stock higher between a channel with parallel lines or into a tightening triangle pattern.

For bullish traders, the "trend is your friend" (until it's not) and the stock may continue to rise upwards within the following channel for a short period of time. Aggressive traders may decide to purchase the stock at the lower trendline and exit the trade at the higher trendline.

Bearish traders will want to watch for a breakdown from the lower descending trendline of the flag formation, on high volume, for an entry. When a stock breaks down from a bear flag pattern, the measured move lower is equal to the length of the pole and should be added to the highest price within the flag.

A bear flag is negated when a stock closes a trading day above the upper trendline of the flag pattern or if the flag rises more than 50% up the length of the pole.

Bearish On Nvidia? Short-term traders looking to hedge a long position, play the dips within a potential continued uptrend or those who believe Nvidia will suffer a bearish reaction to its earnings print, can play retracements using the AXS 1.25x NVDA Bear Daily ETF NVDS.

NVDS is a leveraged ETF aiming to track 125% of the opposite daily performance of NVDA. This leverage boosts trade performance, potentially turning small, brief dips in Nvidia’s stock into significant gains for traders. Using this ETF eliminates the need to borrow NVDA stock from your broker to sell short, offering retail traders an easy and convenient way to play Nvidia bearishly.

Want direct analysis? Find me in the BZ Pro lounge! Click here for a free trial.

The Nvidia Chart: Nvidia’s possible bear flag was formed between Sept. 20 and Monday, with the downward sloping pole created during the first two trading days of that timeframe and the flag forming since. The measured move, if the stock breaks down from the pattern on higher-than-average volume, is about 5.2%, which suggests Nvidia could retrace toward about $400.

  • Nvidia is also trading in a downtrend, making a series of lower highs and lower lows. The chipmaker’s most recent lower high was formed on Sept. 20 at $439.03 and the most recent lower low was printed at the $409.80 mark the following day.
  • Nvidia has a gap below between $306.07 and $366.05, which is about 90% likely to fill in the future. If Nivida drops into the gap as it continues in its downtrend, the stock is likely to find support at the bottom range of the gap.
  • For the bear flag to be negated, Nvidia will have to regain the eight-day exponential moving average as support. If that happens, the downtrend may negate, and a new uptrend could form.
  • Nvidia has resistance above at $439.90 and at $481.87 and support below at $419.38 and at $397.84.
Market News and Data brought to you by Benzinga APIs
Posted In: Long IdeasShort IdeasTechnicalsTrading IdeasExpert Ideas
Benzinga simplifies the market for smarter investing

Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.

Join Now: Free!