Quarterly Outlook
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Technical Update - NVidia forming top and reversal pattern. Cisco - which way to break out of corrective pattern?
Kim Cramer Larsson
Technical Analyst, Saxo Bank
Nvidia has formed an Evening Doji top and reversal pattern (circled) which indicates the share price has peaked - at least short term - and a correction is likely.
Daily RSI is still showing positive sentiment and is above its rising trendline with no divergence supporting possible higher share price
However, medium-term the trend is still down. Weekly chart RSI showing negative sentiment with no divergence indicating lower levels are in the cards.
Nvidia is currently testing the upper trendline in what could be a falling channel. The upper trendline is shifted parallel from the lower trendline.
If Nvidia can close the week above the upper falling trendline and above 170 there could be further upside to around 191 where 100 and 55 weekly SMA’s will provide resistance.
To reverse the medium-term downtrend a close above 192.75 is needed.
If Nvidia trends lower and closes below 137.59 the short-term uptrend has been reversed and medium-term down resumed.
Weekly RSI closing back below 40 will confirm that scenario. If that scenario plays out Nvidia is likely to test October lows around 108 and quite likely trade lower.
RSI divergence: When instrument price is making a new high/low but RSI values are not making new high/low at the same time. That is a sign of imbalance in the market and an weakening of the uptrend/downtrend
Cisco has formed an Ascending like triangle corrective pattern over the past couple of weeks. If Cisco can close above 43.40 there is room up to around $50.
If Cisco instead slides back and breaks below the short-term rising trendline in the triangle sellers are likely to regain power and test key support at 43.39. A daily close below will confirm short-term downtrend.
If that scenario plays out Cisco is likely to drop to around $40 and test the longer-term rising trend line. A break of the trendline is likely to result in Cisco dropping to 35-33 area, possibly lower.
However, weekly RSI is in negative sentiment but with divergence thereby giving mixed signals. The divergence indicates the lows in Cisco back in September was the low. However, that picture is likely to be challenged if Cisco closes below 43.39
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