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CONSOLID FORMATION


Nvdia Unable To Break Resistance

08/12/05 07:44:25 AM
by Arthur Hill

Nvdia established resistance around $29 in mid-June, and the parade of bearish candlesticks confirms selling pressure.

Security:   NVDA
Position:   Sell

As seen in Figure 1, the overall pattern for Nvdia (NVDA) looks like a sharp advance and flat consolidation (magenta trendlines). Although it is quite big, the consolidation resembles a flag and a break above $29.5 would signal a continuation of the prior advance. Conversely, a break below the July low ($25.5) would provide a victory for the bears and target lower prices.

Figure 1: Nvdia. The overall pattern for this stock looks like a sharp advance and flat consolidation.
Graphic provided by: MetaStock.
Graphic provided by: Reuters Data.
 
Bearish candlestick reversals confirm resistance around $29-29.5. The stock formed bearish engulfing patterns in mid-June and mid-July (red ovals). Downside followthrough was limited, as the stock found support around $26 and rallied twice. Most recently, the stock formed a doji with a long upper shadow on August 8 (blue oval). This is akin to a shooting star, which is another bearish candlestick reversal pattern. Further weakness below $27 would confirm this candlestick and turn the swing within the consolidation bearish.

The price relative shows underperformance, and on-balance volume (OBV) shows increased selling pressure. The stock outperformed NASDAQ until mid-June, but has since underperformed. Note that the price relative formed a series of lower highs (gray arrows), and it would take a move above the July high to start outperforming. On-balance volume moved to its May low in July, but has recovered over the past few weeks. However, the indicator has yet to break the July high. Both price and OBV show more weakness than strength and need to move above their July highs to turn bullish again.



Arthur Hill

Arthur Hill is currently editor of TDTrader.com, a website specializing in trading strategies, sector/industry specific breadth stats and overall technical analysis. He passed the Society of Technical Analysts (STA London) diploma exam with distinction is a Certified Financial Technician (CFTe). Prior to TD Trader, he was the Chief Technical Analyst for Stockcharts.com and the main contributor to the ChartSchool.

Title: Editor
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