Nvidia experienced a 3.5% drop on Thursday, following a red-hot streak that temporarily made it the most valuable public company in the U.S. This drop led to the formation of a “bearish engulfing” pattern in the technical charts, indicating a potential reversal in the stock’s upward momentum. A bearish engulfing pattern occurs when a large downward candle follows a series of upward candles, with the bearish candle being larger than the bullish candles preceding it. This pattern suggests that an inflection point could be near and that the stock may be nearing a point of burnout.
Nvidia’s shares have surged more than 160% this year, driven by the booming artificial intelligence industry. The company’s success has made it a market bellwether that can influence the overall market direction. However, some analysts believe that the bearish engulfing pattern seen in Nvidia’s stock may not be significant enough to indicate a major reversal. Confirmation of this pattern often depends on the size of the candles, and in this case, the stock was just 11 cents away from a clear bearish engulfing pattern. Despite this, analysts like Mike O’Rourke, chief market strategist at JonesTrading, note that the momentum behind Nvidia’s recent success may finally be losing steam.
Overall, while Nvidia’s bearish engulfing pattern is concerning, it may not be enough to significantly impact the stock’s long-term prospects. However, it does signal a potential shift in momentum that investors should be aware of. With the growing importance of Nvidia in the market and the ongoing enthusiasm around AI technology, the company’s performance will continue to be closely watched by investors in the coming weeks.
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https://www.cnbc.com/2024/06/21/nvidia-forms-bearish-engulfing-stock-chart-pattern-that-can-sometimes-mark-a-temporary-top.html