Nvidia’s Last Hoorah, This Time For Real…

More and more accounts seem to agree, Nvidia is now really going for it’s last push into a blow-off-top. Just like it did at $900, and $500, as well as it would be coming at $350 as it was overvalued. So without making to much fun of the argument, it would have been true for some days in the incredible rally, you’d just be slightly early, and that’s okay. But now in all seriousness, let’s look at how valid the argument is this time, because with a 5% jump in share price without any other news than going over the $3 Trillion in market cap, makes it seem like something is going on there.

So let’s start of by looking at what a blow-off-top actually is. The blow-off-top is a quite well known technical pattern. Whether you agree with the wizards of lines, or traders of star-signs is completely up to you, but the blow-off-top is one of the most reliable indicators of a trend reversal, this can be short term, as well as longer term, depending on what time frame you look at charts. So what happens?
The signal basically consists of four key elements on which it builds, so let’s go through those.

The first is momentum, a stock (now Nvidia) will need strong momentum to any one side, in this case, we are looking for upward momentum.  

The second is separation. Stocks trade on trends, and often can be tracked with trend lines. A key aspect of a good blow-off-top, is that the stock accelerates its momentum and separates from that trend line. This can also be seen as a fomo stage where we seen an exponential boom in it’s share price.

The Third element is the reversal day, a day that will start of being (extremely) bullish, this is where the trap get’s set. This will often be straight into a resistance area, or when at All-Time-Highs, most likely at a round number like $1400, or $1500. During the day, the stock will start reversing as major players start exiting their positions. Now with a (intraday) down trending stock, more people will quickly exit which results in the stock falling flat on its face, and closing near, or even better, below the open price.

The fourth and final element is the realization part. This builds on the fact that people will realize that they bought high, and will now have to sell low, unless you diamond hand off course in which case none of this is relevant, and I’d wish those individuals good luck with their bag.

I’m not claiming Nvidia is making a blow off top, neither do I argue the valuation or price of the stock. I personally find the future growth of the stock to unpredictable to invest in it as I don’t understand the industry other than that it used to be known as cyclical. The AI chips may have changed that, I don’t know. All I know is that I used to know someone that was short somewhere around $160 to $180 because he thought the stock was overvalued, and I haven’t heard from him since $260. All I know is that at that point he was still short, and certain the stock would go down. It really did, some days in the rally…

What I do know is that I am happy for the people who made lot’s of money in the stock, but that we are also running into the stock split which will happen over the weekend. This is often some sort of “buy the rumor, sell the news” event.
Putting the steps under each other, we clearly have a trend (step one), we also have separation (step two), now we only need step three and four, because this time, the rally will be different! The stock will crash! Because it is expensive! Maybe, someday, somehow. I’m not going to jump in front of a speeding train.

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