TradingKey - Selling pressure mounts on Nvidia ahead of earnings, with technicals suggesting a potential 18% decline to around $180.
On August 19 ET, Nvidia (NVDA) shares rebounded slightly, trading around $219.59, temporarily halting a three-day losing streak. Yesterday, soaring U.S. Treasury yields hit high-valuation tech stocks. As one of the largest market-cap giants in U.S. equities, Nvidia became the top choice for large institutions to take profits and hedge liquidity, causing its share price to drop over 2% and reversing recent gains into losses.
Currently, the market is closely watching the mass production and delivery schedule of the new Blackwell architecture chips. Some institutions worry that initial supply chain yields and assembly complexity could weigh on gross margins in the short term, prompting short-term capital to step aside and wait on the sidelines. Meanwhile, the market is closely watching the free cash flow burn rate of major customers such as Microsoft, Meta, and Google on AI server deployment, raising concerns that overexpansion could lead to a temporary digestion period for Nvidia's procurement.
In addition, the options market shows that implied volatility around the earnings release projects a massive price swing of 8% to 12% in either direction. To avoid the risk of a potential "sell the news" event even if earnings are positive, some short-term capital and quantitative funds (CTAs) have chosen to proactively trim positions ahead of the report, resulting in precautionary selling.
From a technical perspective, Nvidia's recent attempt to hit a new all-time high ended in failure, with the rebound peak lower than the historical peak, forming a descending channel—a classic bearish pattern. Yesterday, Nvidia's shares gapped down and may continue downward to search for support ahead of its earnings release on August 26. The first support level is the middle band around $200. If that level fails to hold, the stock will head toward the second line of defense at the lower band near $180, representing approximately 18% downside from current levels.
Nvidia stock chart, Source: TradingView
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