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Nvidia Stock Price Soars, Analyst Warns of Potential Correction

Chipmaker Nvidia (NVDA) has been a major driver of the stock market recently, with its trading volume reaching record highs. However, some analysts are cautioning that this surge in enthusiasm might be unsustainable.

An analyst firm, BTIG, points out that Nvidia’s daily trading volume is currently 90% above average and could reach 80 million shares. This is close to the volume seen on the day of Nvidia’s earnings report in May. This high volume translates to a notional value traded of around $90 billion, the second highest ever recorded.

BTIG highlights that such a high trading volume was previously followed by a significant stock price decline. In March, after a similar surge in volume, Nvidia’s stock price dropped 22%.

Furthermore, Nvidia’s stock price is currently trading much higher than its long-term average (200-day moving average). BTIG notes that this has only happened a few times in the past decade, and each time it was followed by a correction.

With these factors in mind, BTIG believes that Nvidia’s stock price could be due for a reversal in the coming weeks. Meanwhile, the broader market is showing signs of less activity, with the volume of the S&P 500 ETF (SPY) being 25% below average.

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