nvidia, (NVDA) the trailblazing graphics chip specialist, has had a rough time this year.
The stock hit new 52-week lows on Friday, down 64% from the 52-week high it reached in November.
To say the least, it was not a good piece for the stock. Certainly, the Santa Clara, California company is not alone.
Taiwan Semiconductor (TSM) and advanced microdevices (AMD) are just a hair above their 52-week low, while Intel (INTC) also made new lows last week.
Last quarter AMD reported solid results and mostly in-line guidance. Nvidia announced a major loss of revenue, followed by a lukewarm quarter and disappointing outlook.
Nvidia will host its GTC event this week, which could act as a catalyst. But it has a lot of fundamental and technical momentum that works against it.
All that said, Nvidia has excellent long-term prospects and the stock has been badly beaten. That’s why I want to take another look at the stock.
Trading Nvidia Stocks
The weekly chart above shows Nvidia’s brutal correction, where shares fell more than 63%, then bounced on Friday after marking the 200-week moving average. We’ve been looking at a tag from this brand for almost a month now.
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This may be enough to get some bears off the train and some bulls on board.
After all, if you’re short on Nvidia, the trend has been your friend. But many of these shorts also believe that Nvidia’s 200-week support could be a notable support, and the stock will only fall so far.
Over the years, Nvidia stocks have been no stranger to major declines. In the past 12 years, the stock has gone through three major declines of more than 50%, but – and this is a big but – no more than 57.5%.
The stock suffered in 2008 and 2002, falling 85% and 90% respectively from its peak. But the company is in a very different place now than it was then and I wouldn’t compare those periods to today.
After such a big drop and so much bad news priced in, this area may not be a bad place for long-term investors to build the stock. But if the overall market continues to roll over, Nvidia stock may also remain lower.
If the $125 to $127 area fails as a support, that could open the door to the $110 to $115 zone. There we find the 78.6% retracement from the all-time high to the covid low. In this zone we also find the 2021 low.
Below $110 opens the door to the psychologically relevant $100 level, where the monthly VWAP measure currently also plays a role.
As for the benefit, keep an eye on $145. This July support level has been resistance most recently. Above $150, the 10-week and 21-week moving averages come into play, with the latter acting as the active resistance most recently.
The bottom line: Nvidia stock has seen maximum declines from 54% to 57.5% over the past 12 years. A recent 63.5% drop from its highs and into a key support area could act as a bounce zone.
For long-term investors, an accumulation strategy may not be the worst idea.