Nvidia stock is falling after it will ditch its plans to acquire Arm. That may not be so bad, though.
Nvidia (NVDA) – Get NVIDIA Corporation Report stock is under pressure on Tuesday, down almost 3% and near session lows after the company announced it would no longer pursue a deal with Arm Holdings.
The original $40 billion cash and stock deal was announced in September 2020, but has continued to run into regulatory hurdles in various countries.
Aside from the regulatory headaches, Nvidia’s stock has advanced considerably since the deal was announced.
Although shares were recently down about 40% from the all-time high in November, Nvidia stock is still almost double the price it was trading at when it announced the deal.
Because it was a cash and stock deal, that added tens of billions of dollars to the transaction price.
So while Arm will reportedly keep about $2 billion and go about its own plans (which includes an IPO), I still think Nvidia is worth owning. But what do the charts say?
Trading Nvidia Stock
Daily chart of Nvidia stock.
Chart courtesy of TrendSpider.com
First, anytime a high-quality company like Nvidia comes under this much selling pressure, it has my attention.
Second, this news — the abandonment of the Arm deal — was floated last week, so I don’t really feel like this is fresh news.
The selling in tech doesn’t help and it’s an easy headline for traders to sell— particularly the algos.
As much as I love Nvidia the company I am conflicted on Nvidia the stock. The reasoning is simple: Price.
I loved Nvidia stock on the dip to the 200-day and 50-week moving averages, where it promptly bounced and climbed into the $250 to $270 range. However, the action over the last seven sessions has me hesitating.
While the stock is putting in a higher low and consolidating above the 200-day moving average, it’s also struggling to reclaim the 21-day moving average.
Further, this consolidation looks like a possible bear pennant formation. Traders are used to seeing consolidation after upside runs, but it works in a similar manner on the downside as well.
If that’s the case, we could be looking at a scenario where Nvidia breaks back down to its 200-day and weekly VWAP measure. Below that and the $200 to $210 area may be back on the table.
On the upside, I’m looking for a move over $250 to break the stock out of this pennant and back over the 21-day. In that scenario, $270 could be back in play, followed next by the $275 to $277 zone.
Above $277 and the daily VWAP measure is in play.
The setup is not necessarily bullish or bearish at the moment, but depending on which way we tip from here, it will become one or the other. Stay open-minded.
