Nvidia, the semiconductor giant, continues to look superb both fundamentally and technically as it sets up with a potential buy point. The "Magnificent Seven" stocks have been the talk of Wall Street in 2023, and NVDA has by far been the most magnificent of them all. With five quarters of earnings acceleration, and four quarters of sales acceleration, NVDA is exhibiting many of the traits CANSLIM investors like to see. In addition, the last two quarters sported triple-digit earnings and sales growth, which is a clear sign something special is taking place. With all the focus on AI as a new and emerging market theme, it makes sense that Nvidia would become a target of large funds and institutions looking to gain exposure to this space. With the market now in a strong uptrend and a major low likely in place, this is the time to look for stocks that have the potential for large upside movement in 2024. Nvidia, which is estimated to deliver-triple digit annual earnings growth in 2024, looks to be positioned well in this bull market.
Nvidia was one of the best-performing stocks of 2023, rallying from under $150 to just over $500. Some may say it is extended and due for a reaction, but there is also the potential that this is just the beginning of a much larger move. I'm favoring the bullish perspective for a variety of reasons. The first is the fundamental theme which I've already outlined. The second is the technical action which as taken place over the past nine months. While it is true that NVDA has run up, the monthly chart shows that most of that action was off its' lows. In addition, the weekly chart looks absolutely splendid as NVDA looks to be forming a double-bottom with handle base. Over the past five months, there has not been much distribution which is a subtle sign of strength. In addition, the tight action and consistent support near the 10-week line over the past four weeks is typically a signal of institutional support.
I took a position in NVDA near the 50-day line earlier this month. Now, I'm looking at the resistance levels near $500 for an opportunity to add even more shares on a breakout. This is something I really like to do in a stock I believe is a true market leader. My goal is to buy on the way up over multiple buy points as a way to gradually gain exposure without feeling like I have to dive in all at once. Finally, I'm keeping in mind the old Jesse Livermore rule about round numbers.
"It was an old trading theory of mine that when a stock crosses 100 or 200 or 300 for the first time the price does not stop at the even figure but goes a good deal higher. If you buy it as soon as it crosses the line it is almost certain to show you a profit."
-Jesse Livermore
With the $500 level not too far above, it could be viewed as significant to see that range taken out with authority. While many traders fear buying expensive stocks like NVDA, it is of the utmost importance to remember that these type of large liquid leaders at the exact type of stocks institutions like to traffic into. I will be monitoring NVDA closely in the coming weeks for an opportunity to add to my position.
Risk right. Sit tight.
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Full Disclosure: I currently own NVDA.
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