The Nvidia stock (NASDAQ: NASDAQ:NVDA) opened with a positive gap on Monday, following headlines that the firm is planning to buy the UK-based chip designer Arm from Japan’s SoftBank Group Corp for as much as USD 40bn. This means that Nvidia is likely to be the first to hit the market with the latest Arm designs, leaving its competitors at the back of the queue.
From a technical standpoint, we see that the price structure on the 4-hour chart continues to suggest an uptrend, marked by an upside support line drawn from the low of April 3rd. Although the price fell sharply after it hit its record of 589 on September 2nd, investors and traders managed to keep it above that upside line, which in our view maintains the near-term outlook positive.
Monday’s positive gap adds more credence to that view, but in order to get more confident on further advances, we would like to see a break above Monday’s high, at 533. Such a move may encourage the bulls to drive the battle up, for another test near the stock’s record high of 589, the break of which would take the price into unchartered territory. Given that we cannot mark resistance levels from prior peaks and prior troughs, we would consider as the next important territories the psychological zones of 600 and 650.
Looking at our short-term oscillators, we see that the RSI lies above 50 and has just ticked up again, while the MACD, although negative, lies above its trigger line, pointing north as well. Both indicators suggest that Nvidia may have started to gain positive momentum again, which corroborates the trend-continuation case.
Now, in case the stock slips below the aforementioned upside line, as well as below the key support of 468, marked by the lows of September 4th and 8th, we will abandon the bullish case and start examining a possible trend reversal, as such a move will confirm a forthcoming lower low on both the 4-hour and daily charts. Investors may allow the price to fall towards the low of August 11th, at 432, the break of which could extend the slide towards the 392 territory. That zone provided decent support on July 14th and 24th.