Asset Watch
Tuesday, October 22, 2024
It’s all smiles on Wall Street, as Netflix dazzled with superb quarterly earnings and the Atlanta Fed has third-quarter real GDP growth projected at 3.4%. And with the combination of economic resilience and Big Tech performance confirming the bulls’ optimism, the S&P 500 continues to print new record highs.
Though NVIDIA has been a major outperformer in 2024, could another surge be on the horizon?
Bank of America analysts increased their NVIDIA price target from $165 to $190 on Oct. 17, telling clients, “NVDA’s engagements span multiple verticals, and offerings such as AI Foundry, AI Hubs, NIMs are key levers to its AI leadership, not only on the hardware side but also on systems/ecosystems side.”
Furthermore, “In $ terms, NVDA could take in $200bn+ of FCF over the next two years, rivalling that of AAPL and providing growth optionality.’
The bottom line? The “generational opportunity” could result in a nearly 40% rally.
The S&P 500 has been unusually strong recently in the face of bearish seasonality and geopolitical uncertainty. Although, with the largest companies in the index reporting earnings over the next two weeks, sentiment could swing rapidly as the drama unfolds.
While NVIDIA could have plenty of fuel left in the rocket ship, caution may be warranted in the days ahead. The blue and yellow lines track the 5 and 20-hour moving averages. If you analyse the horizontal white lines, you can see that when the 5-hour MA crosses below the 20-hour MA from above, NVIDIA often suffers corrections.
Likewise, the 5-hour MA has also been a solid short-term trend indicator, and NVIDIA closed below the key level on Oct. 18. Therefore, while the 5-hour MA has not crossed below the 20-hour MA yet, it could happen very soon and signal caution.
To play it, monitor the 5 and 20-hour MAs to see how NVIDIA responds. Sharp falls typically occur with the stock breaking below the 5-hour MA and both levels becoming resistance en route to lower lows.
However, if NVIDIA recaptures the key level and the 5-hour MA turns up again, the bulls deserve the benefit of the doubt.