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Nvidia Rebounds as Traders Seek Support Amid $430B Selloff

Quiver Editor

Nvidia (NVDA) shares showed signs of stabilizing after a massive $430 billion selloff prompted traders to seek potential support levels. The stock rose by as much as 3.5% in premarket trading on Tuesday, aiming to break a three-day losing streak that pushed it into a technical correction — a decline of 10% or more from a recent peak — for the first time since April. Despite the recent downturn, analysts like Ari Wald from Oppenheimer believe Nvidia’s long-term trend remains strong, noting the shares are still trading well above their 50-day and 100-day moving averages.

The rout has caused concern among traders, but some see it as a typical behavior for Nvidia, which has a history of bouncing back after significant selloffs. According to Daniel O’Regan from Mizuho Securities, Nvidia tends to rebound on the fourth day following such declines about 63% of the time. While technical analysis isn’t precise, it provides a roadmap for investors. Nvidia has surged this year due to strong demand for its AI chips, with the stock rising 43% from its May 22 earnings report to its peak on June 18, where it reached a market value of $3.34 trillion, surpassing Microsoft (MSFT).

Market Overview:
  • Nvidia shares steady after a $430 billion selloff.
  • Stock aims to snap a three-day rout entering a technical correction.
  • Analysts highlight strong long-term trends despite recent decline.
Key Points:
  • Nvidia's shares still above key moving averages, indicating strength.
  • Stock tends to rebound on the fourth day after significant selloffs.
  • Demand for AI chips has driven Nvidia's stock performance this year.
Looking Ahead:
  • Short-term support seen at $115, significant support at $100.
  • Analysts monitoring long-term uptrend and potential volatility.
  • Market awaiting Fed's stance on rates and upcoming election impact.

Nvidia's robust performance in 2023, driven by unrelenting demand for its AI chips, has made it one of the hottest trades in the market. High options activity contributed to its climb, with market makers constantly hedging their positions, leading to what is known as a gamma squeeze. Analysts like Buff Dormeier from Kingsview Partners see short-term support around the $115 level, close to a key Fibonacci retracement level, while the long-term trend remains intact. However, breaking below $100 could signal a need for patience amid potential market volatility.

Bruce Zaro from Granite Wealth Management emphasizes that while breaching the first level of support wouldn't be concerning for a stock in an uptrend like Nvidia, a drop below $100 would be significant. This could indicate the need for caution, especially in a volatile market environment influenced by upcoming elections and the Federal Reserve’s decisions on interest rates.

About the Author

David Love is an editor at Quiver Quantitative, with a focus on global markets and breaking news. Prior to joining Quiver, David was the CEO of Winter Haven Capital.

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