Nvidia Corporation (NASDAQ:NVDA) was trading slightly lower on Thursday, in sympathy with the S&P 500, which was also trading down.
The tech giant has been trading in a fairly consistent downtrend between two parallel lines since May 4 but recently settled into a triangle pattern on the daily chart.
A symmetrical triangle pattern is created when a stock forms a series of lower highs and higher lows between a descending and an ascending trendline, which meet on the right side of the chart to form an apex. The pattern indicates that the bulls and bears are equally in control.
A symmetrical triangle is often formed on lower-than-average volume and demonstrates a decrease in volatility, indicating consolidation. The decreasing volume is often followed by a sharp increase in volume when the stock breaks up or down from the pattern, which should happen before the stock reaches the apex of the triangle.
- Aggressive bullish traders may choose to purchase stock in a symmetrical triangle when the security reverses course on the lower ascending trendline, with a stop set if the stock rejects at the upper descending trendline of the pattern. More conservative traders may wait for the stock to break up bullishly from the pattern on higher-than-average volume.
- Aggressive bearish traders may choose to trade opposite to the bulls, entering into a short position on a rejection of the upper descending trendline and covering the position if the stock finds support at the lower trendline. Opposite to the bulls, conservative bearish traders may wait for the stock to break down from the lower trendline on higher-than-average bearish volume.
Want direct analysis? Find me in the BZ Pro lounge! Click here for a free trial.
The Nvidia Chart: Nvidia began trading in a symmetrical triangle on July 5 and is set to meet the apex of the pattern on July 18. Traders and investors can watch for the stock to break up from the descending trendline of the pattern on down from the ascending trendline on higher-than-average volume prior to July 18 to gauge whether the triangle has been recognized.
- Nvidia is also trading in an inside bar pattern. With all of Thursday’s price action taking place within Wednesday’s range. The pattern in this case is neutral because of the existence of the triangle. Either way that Nvidia breaks from the mother bar later on Thursday or on Friday, will also break the stock up or down from the triangle.
- Nvidia is trading below the eight-day and 21-day exponential moving averages (EMAs), with the eight-day EMA trending below the 21-day, both of which are bearish indicators. If Nvidia is able to break up from the triangle and inside bar patterns, the stock will regain the eight-day EMA, which would give bullish traders more confidence going forward.
- Nvidia has resistance above at $161.37 and $180.73 and support below at $145.75 and $135.43.
Photo: Courtesy Nvidia
