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Buy the Dip in Nvidia Stock or Wait for Lower Prices?

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Nvidia  (NVDA) – Get NVIDIA Corporation Report stock has been on a horrid skid, racking up a near-20% decline over the last five days.

At one point, Nvidia stock was up more than 3% on April 12, but those gains have since faded. It follows five straight daily losses and a stretch where Nvidia stock declined in nine out of 10 sessions.

It’s been an ugly run in semiconductor stocks though, not just Nvidia.

Earlier this month, I asked how many times Advanced Micro Devices  (AMD) – Get Advanced Micro Devices, Inc. Report could bounce off $100 before that support finally gave way. That finally happened on Monday.

In that same session, the Nasdaq fell 2.2%, the VanEck Semiconductor ETF  (SMH) – Get VanEck Semiconductor ETF Report fell 2.25% and AMD and Nvidia fell 3.6% and 5.2%, respectively. 

For Nvidia, a downgrade didn’t help matters, but the damage started two weeks ago.

At yesterday’s low, Nvidia stock was down 25% from its high on March 29. It’s been hitting a skid like it hasn’t seen since March 2020 — and that’s saying something.

We’ve already seen AMD break its key support level near $100 and fail to reclaim it. Will Nvidia be the next big stock to test its key support zone?

Daily chart of Nvidia stock.Chart courtesy of TrendSpider.com

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From the March low to the March high, Nvidia stock rallied 40%. It was a leader off the low, and joined Tesla  (TSLA) – Get Tesla Inc Report and Apple  (AAPL) – Get Apple Inc. Report as the tech leaders

However, Nvidia has now broken down below far too many key support levels to be considered a current leader.

If Nvidia catches a bid, it could open the door to a gap-fill back to $230.62. Above that could put the declining 10-day and still-rising 200-day moving averages in play.

If the stock really takes off, bulls can look for the second of two gap-fills near $258, followed by the 61.8% retracement of the current range near $261.

But what is the buy trigger?

I think that’s the problem with Nvidia right now and semi stocks in general. Getting long is akin to catching a falling knife, even as Nvidia is one of the best companies in the market — again, in my opinion.

Some investors may find value with the stock near current levels and I won’t argue with their thesis. However, I would kindly point out that larger support sits down at on the $206 to $210 area.

Like $100 was for AMD, the $206 to $210 area has been support for Nvidia throughout 2022. If it tests it again, bulls will likely look to buy the dip and at least they will have a technical reason for doing so. But again like AMD, there will be questions as to how far it can bounce.  

On a break of $200, look for a test of the 21-month moving average, currently near $193. This measure was previous support in March 2020 and could play that role again on a further decline. 

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