Chart Analysts Warn of Further Declines Ahead.

(Bloomberg) — The recent selloff that has significantly impacted Nvidia Corp. shares has left market technicians on high alert, particularly as they monitor a crucial momentum indicator for signs of further trouble. Chart watchers are currently focused on the 200-day moving average, a long-term momentum measure that was breached in January for the first time in over two years. Although Nvidia saw a slight uptick on Tuesday, the stock remains well below this critical gauge, prompting market professionals to scrutinize the trajectory of the moving average closely.

Understanding the 200-Day Moving Average

“It’s definitely a change of character compared to the last two years,” remarked Todd Sohn, senior ETF and technical strategist at Strategas Securities LLC. “On a tactical basis, it’s hard to remain super bullish on a name once the 200-day starts to crest and slope downward.” Sohn is particularly attentive to the next significant level for Nvidia, which he identifies as $113 per share, the intraday low reached during an early February trough.

Market Predictions and Support Levels

Rick Bensignor, chief executive officer of Bensignor Investment Strategies and a former strategist at Morgan Stanley, shares a similar outlook. “I’m inclined to think there’s more to go on the downside,” Bensignor stated. “We could see support anywhere from here to $110, but below that my minimum downside target is in the $107-$103 range.” He further noted that the next support level is approximately $90.

Broader Market Context

The downturn in Nvidia’s stock comes amid a wave of uncertainty that has rattled many of the largest technology companies. The so-called Magnificent Seven group of tech megacaps has recently entered correction territory, having fallen more than 10% from their peak. The Nasdaq 100 Index is also flirting with similar levels of decline.

Impact of External Factors

Beyond the specific concerns surrounding Nvidia, there are broader questions regarding President Donald Trump’s tariffs and the potential impact on technology companies, particularly those with significant exposure to China. Notably, Nvidia has been responsible for over 30% of the Nasdaq’s decline this year. Tesla Inc. and Broadcom Inc. follow as the second and third largest contributors to this downturn, both of which are also hovering near their 200-day moving averages.

Long-Term Outlook for Nvidia

“It is possible we’ve seen a long-term peak in the stock. Nvidia remains the way to play AI, and people continue to debate AI,” said Buff Dormeier, chief technical analyst at Kingsview Partners. “The stock looks tired on a longer-term basis. The flattening of the 200-day trendline is a sign that momentum has been weakening and things are turning.”

Valuation Concerns

The recent rout has led to a decline in Nvidia’s valuation based on forward earnings, which now stands at approximately 25, marking the lowest multiple the technology giant has experienced in over a year. In comparison, the Nasdaq trades at about 22 times forward earnings, while the S&P 500 Index has a multiple around 20. This falling valuation, coupled with the recent pessimism surrounding Nvidia shares, has left many bulls puzzled, especially considering that major technology companies have indicated their intention to continue investing billions in artificial intelligence over the coming years.

“The de-rating feels a little stunning, especially right at the start of a product cycle,” added Dormeier. As Nvidia navigates these turbulent waters, investors and analysts alike will be keeping a close eye on the stock’s performance and the broader market dynamics that could influence its trajectory. For more detailed insights, you can read the original article here.