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Nvidia Shares Experience Significant Decline Amid Regulatory Challenges

Key Takeaways

Nvidia’s stock price dropped by nearly 7% on Wednesday following the company’s announcement of a $5.5 billion charge attributed to U.S. export limitations on its AI chips sent to China. Despite the steep decline, the stock’s movement formed a doji candlestick pattern, indicating a standoff between buying and selling pressure. Investors are advised to keep an eye on critical support levels positioned at approximately $96 and $76, while resistance levels situated around $130 and $150 should also be noted.

On Wednesday, Nvidia (NVDA) experienced a notable drop of almost 7%, which was primarily triggered by the revelation of a new $5.5 billion charge linked to U.S. government restrictions impacting the export of its artificial intelligence chips to China.

In an official regulatory disclosure, Nvidia stated it would require an export license to provide its highly sought-after H20 chips to the Chinese market. The necessity for licensing arises amidst fears that these chips could be utilized by the Chinese government to develop advanced supercomputers. This unexpected development is particularly striking considering Nvidia designed the H20 GPUs to align with existing restrictions imposed under the Biden administration aimed at preventing potentially adversarial applications of advanced technology.

While Nvidia’s stock has shown signs of recovery since recent lows, it has still witnessed approximately a 20% decrease in value since the beginning of the year, largely influenced by uncertainties surrounding U.S. trade policies and fluctuations in major tech investments in AI technologies.

In the following sections, we will delve into a detailed technical analysis of Nvidia’s stock chart, highlighting significant price levels for investors to monitor closely.

Analyzing the Doji Candlestick Pattern

After seeing a surge in buying interest close to the bottom trendline of a falling wedge pattern last week, Nvidia shares initially climbed before encountering resistance near the pattern’s upper boundary.

Despite the significant drop on Wednesday, the stock formed a doji candlestick, which is often interpreted as a sign of uncertainty or indecision among investors regarding market direction.

It’s important to delineate key support and resistance levels on Nvidia’s chart that traders may find critical in the current market environment.

Essential Support Levels to Monitor

Nvidia ended Wednesday’s trading session at $104.49, reflecting a 6.9% decline.

Should the selling trend continue, the stock may approach the support level around $96. This price point may attract buyers due to its historical significance, coinciding with notable peaks observed in the prior year.

If bulls fail to uphold this April low price, it could lead to further declines towards the $76 level, where investors might seek opportunities to establish positions near the previous swing low recorded in April of last year.

Critical Resistance Levels to Watch

A breakout, supported by substantial volume, above the upper boundary of the falling wedge could facilitate a movement towards approximately $130, which is situated just above the 200-day moving average. This threshold is also expected to face resistance due to previous price activity around last August’s peak and the trough observed in December.

If the stock surpasses this $130 resistance, it could potentially rally to the $150 mark. This zone may prompt investors to secure gains due to its proximity to several previous peaks that were established just beneath the stock’s historical high in January.

Importantly, this level aligns with a theoretical measured move target, derived from calculating the depth of the falling wedge and projecting that amount onto the pattern’s upper trendline. For example, adding $40 to the $110 resistance provides a forecast target of $150.

The opinions and analyses expressed in this article are intended for informational purposes only. Please refer to our warranty and liability disclaimer for additional details.

As of the date this article was published, the author does not hold any shares of the mentioned securities.

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