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What Nvidia Needs to Avoid a Breakdown (NVDA)

The chipmaker's favorite industries aren't what they used to be, but there's a new opportunity for NVDA stock around the corner

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The past five weeks have been tough ones for chipmaker Nvidia Corporation (NASDAQ:NVDA). NVDA stock has fallen 15% from its early February high, mostly only the heels of a pair of headlines.

What Nvidia Corporation Needs to Avoid a Breakdown (NVDA)
Source: Nvidia

Overblown fear? Maybe. But, maybe not. One thing’s for sure, though: The company will have to paint a compelling picture sooner than later if NVDA stock is going to sidestep a significant breakdown.

Hangin’ By a Thread

In all fairness, Nvidia stock did make for an easy target as of last month. Shares had rallied 360% over the course of the preceding 12 months and were ripe for profit-taking. Traders only did the prudent thing.

Nevertheless, the potential for further downside is still significant. One more good “down” day from NVDA stock could do the trick.

The daily chart of NVDA below tells the tale.

NVDA stock chart view 1

The pullback since early February was only halted when the chart touched the 100-day moving average line (gray) … a natural floor. The bulls have mustered a little traction since that day a week and a half ago, but it’s been a belabored effort, and far from decisive. One more stumble could push the stock under the 100-day moving average line and really put some profit-taking into motion.

Still, if the company can put just the right spin on a couple of things it’s got in the hopper, it may be able to sidestep a mini-catastrophe for NVDA stock (or at least limit it).

2 Things Working in Favor of Nvidia

Calling a spade a spade, Nvidia did get a little sloppy.

It was at one time considered the leader or mobile chips, if not by quantities measures than in qualitative. It has also kept a firm grip on its fair share of the GPU market while rival AMD slipped; some of that share was recently driven by an unlikely alliance with Intel.

That whole time, though, Advanced Micro Devices was working on a new GPU called Vega that would give Nvidia’s Pascal a real run for its money. Vega will debut later this year. Indeed, the buzz is that Intel may be about to swap its partnership with Nvidia for one with AMD.

Point being, NVDA could be in real trouble, real soon.

It’s too soon to assume the absolute worst, though. The company has a couple of aces in the holes it might be able to play in a move that keeps the company in solid shape.

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Article printed from InvestorPlace Media,

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