What the Charts Say About Nvidia Stock Heading Into Earnings

Nvidia CEO Jensen Huang during the China International Supply Chain Expo this July. (JADE GAO/AFP via Getty Images)

Key Points

• Nvidia’s stock performance after recent earnings reports was lukewarm at best, with declines following three of the four announcements.
• Nvidia has declined 1% in the last three months, underperforming the VanEck Semiconductor ETF’s 15% gain.
• Nvidia is trading at a critical $180 level, with a break below potentially leading to a drop toward the $150 support level.

Nvidia , the 800-pound gorilla in the semiconductor group, reports earnings after the close Wednesday. The report will be closely watched, with investors crossing their fingers it will jump-start a tech rally that has come to feel like it’s on life support.

The last four times Nvidia reported earnings, the market reaction was lukewarm at best. On Aug. 28 the stock fell 0.8% in response to fiscal second-quarter earnings and subsequently dropped four of the next five days. The fiscal first-quarter report saw the stock gain 3.2% on May 29, a lone bright spot. On Feb. 27, Nvidia slumped 8.5% after its first earnings report of the year and then another 13% over the next eight sessions. On Nov. 21, 2024 its initial reaction was to rise 0.5% before a 10% decline over the next four trading days.

Semiconductor stocks, which had tremendous wind at their backs when the AI story was in full force, have fallen on hard times. The VanEck Semiconductor ETF is now 11% off its most recent 52-week high and has undercut its 50-day simple moving average for the first time since early September. Over the last three months, Nvidia has done even worse than the ETF as seen on the ratio chart below. Over that period, the VanEck Semiconductor ETF has gained 15% while Nvidia has declined by 1%.

Nvidia’s weakness against the broad semiconductor ETF over the last three months.

In recent trading, Nvidia is resting on an inflection point as it trades right on the neckline (pivot) of a bearish head and shoulders at the round $180 number. This is also retesting a prior bull flag breakout from early October that met its measured move to $210 nearly perfectly. The stock never really seemed to feel comfortable above the very round $200 number as it made a habit of closing at the lows of the daily range. A break below $180 could see a move toward $150 which would be rough 200-day simple moving average support.

A bearish head and shoulders pattern is emerging as Nvidia retests the prior bull flag breakout.

Putting on a trade before earnings is a fool’s play, as it can go either way. But I do think investors may be disappointed if they are looking for Nvidia to carry the torch in the near term, especially given its fragile action after three of the last four earnings reactions.

Doug Busch is the senior technical analyst at Barron’s Investor Circle. His technical view is added to stock picks, including those published exclusively for Investor Circle readers. A glossary of technical terms is updated regularly with new entries.