Nvidia could fall as it attempts correction below the regression channel

0
By:

Motiur Rahman

on
May 28, 2022

Nvidia beat analyst expectations on earnings and revenues.

The company, whales, and large investors such as Tutanota LLC believe the stock is undervalued.

Market forces, however, ensure that the stock is under pressure and the price is set for further declines.

Nvidia Corporation (NASDAQ:NVDA) is trading at $188. This is after the stock gained 12.68% this week, following a losing streak lasting eight weeks. The gain comes from Q1 results, which showed improvements in financial performance.

EPS grew from $0.91 to $1.36. The performance beat analyst expectations of $1.21. Revenues grew from $5.66 to $8.29 billion. The company also maintained its share buyback program. This performance was not enough to jolt the stock back to the valuation recorded 8 weeks ago.


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There was a tender to purchase 215,000 shares of Nvidia at $210. That tender by Tutanota LLC was conditional to the valuation of the stock being above $210 on May 27th. The day came, and the stock closed at $188. This means that if shareholders accepted that offer, then they would get less than the market price for the stock.

It is uncertain whether the tender above would be extended. However, its analysis shows that there is a strong belief that Nvidia is undervalued by the market. This belief is reinforced by bullish whaling on the stock. Regardless, the stock has remained suppressed and could edge lower in the coming weeks.

Nvidia faces more bearish pressure

Source – TradingView

Nvidia is trading below the lower limit of the regression channel. This week’s price appears to correct upwards. However, it is unlikely that the stock will rejoin the upward trend. Instead, the stock is likely to reverse the week’s trend and begin declining further.

At the current valuation, the stock faces resistance at both $190 and $200. Both points are below the regression channel. Since it is unlikely for the stock to cross above these points, Nvidia is a recommended sell.

Summary

Nvidia reported earnings improvement within the week. However, the good earnings were not enough to pull the stock out of the declining trend. We recommend selling Nvidia as prices are projected to fall lower.

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