Stock of the Day (2/11/21) – Nvidia (NVDA) BREAKS OUT!

Today’s stock of the day is Nvidia. For those of you who don’t know the company, NVDA focuses on PC graphics cards (GPUs) and artificial intelligence. If you know someone who likes gaming and owns a gaming PC, they more than likely have an Nvidia GFX in there. Nvidia has been around a long time and dominates the market along with their competitor AMD (Advanced Micro Devices) – maybe we will cover them next post! For today, we address the question: Should I buy NVDA?

Chart Formation

After reaching a new high of $587.66 on 11/13/2020, NVDA pulled back as investors took a breather. This formed a flat base of about 12 weeks until yesterday. During the flat base, volume dried up compared to the stock of the day’s prior run up to its previous high. The lower volume indicates that investors were indeed cooling off after a great run, and certainly affirms that overall sentiment wasn’t changed.

On 2/10/2021, the stock broke out to a new all time high, passing the $587.76 buy point. The stock of the day hit as high as $596.20 before closing at $590.57. Nvidia is very much ripe within the 5% buy zone of the breakout. So what’s next? Is Nvidia a good stock to buy? Let’s see how the chart pattern rounds up on our strengths and weaknesses.

stock of the day nvda

Strengths

  • The flat base pattern lasted 12 weeks, well over the 6-8 week minimum required for strong patterns
  • During the flat base, volume dried up as investors cooled off. This points to investors feeling comfortable in the current price zone and not rushing to take profits and get out.
  • Nvidia is at an all-time high. These patterns work out best in the highest quality companies who are constantly growing, which Nvidia continues to achieve.

Weaknesses

  • The breakout occurred on basically completely average daily volume of 30.1M vs. 30.9M average. The most successful breakouts will show higher volume.

Should I Buy NVDA?

Nvidia is in a great place right now. We aren’t here to tell you to buy or sell the stock. We lay out our opinion of what we see on the charts and leave that to you to decide. The main weakness of average volume on the breakout day does exist here, so it is always worth being cautious as it is with any trade.

To give full disclosure, I have opened a long position on NVDA as of 2/10/2021 as a result of seeing this pattern.

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