Money Markets

Should Investors Take a Bite out of NVIDIA Corporation (NVDA)?

After staying quite for a long time NVIDIA Corporation (NASDAQ:NVDA) shares have recently been behaving interestingly to keep investors awake. Many experts agree that the truth about a stock is best reflected in the way it moves on the chart. For this stock, the chart has a lot to say about future performance.

How has the stock performed recently?

NVIDIA Corporation (NASDAQ:NVDA) has been trading in a bullish manner, based on the relative positions of the stock’s 20 and 200 day moving averages. In the last month, the price of NVDA has increased +2.26%. Shares are now up over the past year, outperforming the broad market by -100% and outperformed a peer group of similar companies by 3803%. After the latest session, which saw the stock close at a price of $228.03, NVDA sits below its 52-week high.

Momentum indicators

Of course, these surface-level price movements don’t tell us much about the direction that NVDA may be headed in the future. Fortunately, there is way to use the speed and magnitude of these price changes to predict future performance, thanks to what are known as momentum indicators. As momentum slows, it might be a sign that a support or resistance level has been reached, and that a trend is about to reverse. Two such indicators are the RSI (Relative Strength Index) and the Stochastic %k Oscillator, which fluctuate on a scale of 0 to 100. A reading above 70 indicates that a stock is overvalued, and a reading below 30 implies that it is undervalued. The 20-day RSI for NVDA is 52.93%, which suggests that the stock is not particularly expensive or cheap, and not predisposed to a reactive price movement based on this measure. The 20-day Stochastic %k measure, which sits at 48.32%, tells a similar story, and suggests that NVDA currently trades in neutral territory.

What do the trading volumes reveal?

Volume patterns can also be useful for predicting future performance. When trading activity is abnormally high, it’s often a sign that the market feels particularly strong in one way or another about the future direction of a stock. NVIDIA Corporation (NVDA) average trading volume of 18,159,785 during the past month is 3.23% above its average volume over the past year, indicating that investors have been more active than usual in the stock in recent times.



What do the analysts think?

NVDA is currently overvalued by 2.91% relative to the average 1-year price target of $221.58 taken from a group of Wall Street Analysts. The average investment recommendation on a scale of 1 to 5 (1 being a strong buy, 3 a hold, and 5 a sell) is 2.30, which implies that analysts are generally neutral in their outlook for NVDA over the next year.

How risky is the stock?

When analyzing a stock’s price performance, it’s essential to take risk into account. Beta, which measures a stock’s volatility relative to the overall market, can be used to gauge the level of systematic risk associated with a particular stock.

NVIDIA Corporation (NASDAQ:NVDA) has a beta of 1.47, compared to a beta of 1 for the market, which implies that the stock’s price movements are more extreme than the market as a whole. NVDA therefore has an above average level of market risk. During the past couple of weeks, NVDA average daily volatility was 61.33%, which is -23.8 percentage points higher than the average volatility over the past 100 days.




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