NVDA by several measurements appears to be the most overbought stock in the US stock market, so a pullback seems inevitable at some point.
But did NVDA create a blow-off top in today’s trading?
A blow-off top, also known as a parabolic top, is a market phenomenon characterized by an extreme and unsustainable surge in price, typically seen in very popular stocks – this has existed in NVDA for several months.
During a blow-off top, the price of the asset undergoes a rapid and near-vertical ascent, often accompanied by a surge in trading volume and investor euphoria – we have certainly seen that in NVDA also.
This upward movement tends to accelerate exponentially, with minimal or short-lived pullbacks.
However, the unsustainable nature of the rally eventually leads to a sharp and significant reversal in price, as investors who bought into the frenzy begin to sell their positions in droves.
The resulting downturn often erases a substantial portion of the gains made during the parabolic rise.
Although no one expects the demand for chips – especially those manufactured by Nvidia – to evaporate any time soon.
But today’s trading brought a huge down day to other chip manufacturers as well including AMD, TSM, & the semiconductor ETF SMH.
A blow-off top is frequently followed by a decrease in prices that can match the velocity of the prior run-up.
Let’s take a look at some charts to see what might happen to NVDA stock price now.
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