Nvidia Stock Is a Buy, but the Question Is When?

NVDA stock - Nvidia Stock Is a Buy, but the Question Is When?

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We have seen a shellacking in the semiconductor space lately, led lower by Nvidia (NASDAQ:NVDA) and Advanced Micro Devices (NASDAQ:AMD). As it pertains to the overall market, that doesn’t tell a great tale. Not only has NVDA stock been a leader off the March low, but its underperformance could be a market-leading indicator.

Call me crazy, but I like to use the semiconductor space as a barometer for economic health. They’re used in virtually every sector, and therefore, have notable significance. Of course, while tech stocks can get a bad rap due to increased volatility, let’s not pretend that tech hasn’t been the best-performing group for roughly two decades.

Not only was Nvidia a leader off the March lows — along with Tesla (NASDAQ:TSLA) and Apple (NASDAQ:AAPL) — it’s a leader in tech stocks. And as it pertains to semiconductors, our economic barometer, Nvidia is a leader in that group as well.

So, when NVDA stock falls in nine out of 10 sessions and skids lower by 25% in that span, bulls should take notice. Now trying to find its footing in the low-$200s, Nvidia is in focus.

On Wednesday, NVDA stock is rallying following an upgrade from analysts at New Street Research. Analyst Pierre Ferragu raised Nvidia’s price target from $250 to $280, and upgraded the stock from “Neutral” to “Buy.” Furthermore, Ferragu believes that cryptocurrency price declines are no reason to avoid NVDA stock.

Up about 3% on the day, it helps that semiconductors, in general, are pushing higher. Don’t forget, that Taiwan Semiconductor (NYSE:TSM) will report earnings tomorrow too.

NVDA Stock Chart

Daily chart of NVDA stock
Click to Enlarge
Source: Chart courtesy of TrendSpider

As it pertains to the chart, NVDA stock is trying to find its footing in a key area. The $205 to $210 zone has played a key role in support. Right now, it’s stabilizing just above that area. If it can rotate higher, the gap-fill level near $230 is in play, followed by the declining 10-day.

Should selling pressure pick back up, we may need to keep an eye on the support level below. If Nvidia breaks below $200, the 21-month moving average is likely in play.

Overall, it’s not a question of “if” this stock is a buy, but more a question of “when.” For long-term holders, nibbling after a 40% correction is likely a reasonable starting point.

On the date of publication, Bret Kenwell held a long position in NVDA. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell.


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