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Technical Update - Microsoft, NVidia & Tesla
Kim Cramer Larsson
Technical Analyst, Saxo Bank
Summary: Top and reversal patterns in Microsoft, NVidia and Tesla indicates correction. But how big a correction could we expect?
Two days in a row Microsoft has opened higher only to be sold off heavily during the session. The two red bearish candles are called Two Crows and is a top potential top and reversal pattern (Ideally there should be a body gap between the last green bullish candle and the first red bearish candle but is still a bearish signal).
Adding to the top and reversal signal RSI is showing divergence. If RSI closes below 60 we are likely to see lower levels in Microsoft.
Support at around 254.78, which is also the 0.382 retracement, and the 200 daily Moving Average. A test of the medium-term falling trend line seems likely.
A close below could pave the way lower to strong key support at around 242 and the 0.618 retracement. 55 and 100 MA will offer support in the area.
If Buyers can regain control a close above 273.76 will demolish and reverse the top and reversal picture.
Adding to the top and reversal signal RSI is showing divergence. If RSI closes below 60 we are likely to see lower levels in Microsoft.
Support at around 254.78, which is also the 0.382 retracement, and the 200 daily Moving Average. A test of the medium-term falling trend line seems likely.
A close below could pave the way lower to strong key support at around 242 and the 0.618 retracement. 55 and 100 MA will offer support in the area.
If Buyers can regain control a close above 273.76 will demolish and reverse the top and reversal picture.
Nvidia looks quite toppish short term having formed an Upside Gap two Crows pattern (Circled) . It is actually a 50/50 top and reversal/Continuation pattern but with RSI showing divergence and market gapped lower Friday with Nvidia closing below rising trendline, there is strong indication a correction is to unfold.
A correction that could take Nvidia down to 0.382 retracement and support at around 191.50.
A close below 191.50 could lead to further selling down to the 0.618 retracement at 173.74 possibly testing support at around 167.13.
For NVidia to continue its uptrend a close of body gap Friday and close above 230.20 is needed.
If NVidia takes out 230.20 it breaks the strong resistance level – see weekly chart – and extends its uptrend towards 267.57 which is the Inverted Shoulder-Head-Shoulder pattern potential target illustrated by the vertical arrows and the Fibonacci Extension. Strong resistance around 283.50.
A pattern and scenario that will remain intact unless Nvidia closes below the Neckline
The strong bounce in Tesla since New Year seems to come to an end. Tesla has formed a top and reversal pattern in the form of an Evening Doji star formation (circled).
This pattern comes after an uptrend that also saw the three classic gaps often seen in a strong upwards move.
Break-away, Continuation and Exhaustion gap. Those gaps are important when the trend reverses as they will act as support areas.
Despite no divergence on RSI an Evening Doji star is a quite reliable top and reversal pattern indicating Tesla shares to perform a correction possibly resuming bear trend.
Support at around 182.50 but a sell-off down to the strong 0.618 retracement and support at around 144.67 could play out.
A close above the peak in the Evening Doji star i.e., above 214 will demolish the top and reversal scenario and Tesla would be likely to push higher towards strong resistance at around 234.40
Author is holding a short position in Tesla
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