Technical Analyst, Saxo Bank
Summary: Top and reversal patterns in Microsoft, NVidia and Tesla indicates correction. But how big a correction could we expect?
Nvidia looks quite toppish short term having formed an Upside Gap two Crows pattern (Circled) . It is actually a 50/50 top and reversal/Continuation pattern but with RSI showing divergence and market gapped lower Friday with Nvidia closing below rising trendline, there is strong indication a correction is to unfold.
A correction that could take Nvidia down to 0.382 retracement and support at around 191.50.
A close below 191.50 could lead to further selling down to the 0.618 retracement at 173.74 possibly testing support at around 167.13.
For NVidia to continue its uptrend a close of body gap Friday and close above 230.20 is needed.
If NVidia takes out 230.20 it breaks the strong resistance level – see weekly chart – and extends its uptrend towards 267.57 which is the Inverted Shoulder-Head-Shoulder pattern potential target illustrated by the vertical arrows and the Fibonacci Extension. Strong resistance around 283.50.
A pattern and scenario that will remain intact unless Nvidia closes below the Neckline
The strong bounce in Tesla since New Year seems to come to an end. Tesla has formed a top and reversal pattern in the form of an Evening Doji star formation (circled).
This pattern comes after an uptrend that also saw the three classic gaps often seen in a strong upwards move.
Break-away, Continuation and Exhaustion gap. Those gaps are important when the trend reverses as they will act as support areas.
Despite no divergence on RSI an Evening Doji star is a quite reliable top and reversal pattern indicating Tesla shares to perform a correction possibly resuming bear trend.
Support at around 182.50 but a sell-off down to the strong 0.618 retracement and support at around 144.67 could play out.
A close above the peak in the Evening Doji star i.e., above 214 will demolish the top and reversal scenario and Tesla would be likely to push higher towards strong resistance at around 234.40
Author is holding a short position in Tesla
2024: The wasted year
Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.
As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.
With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.
Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.
Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.
As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.
With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.
Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.