News negativity limits NVIDIA stock's potential rebound

NVIDIA stock began the new quarter with a moderate rebound from last September's lows. While the technical picture supports a short-term price recovery, it is unlikely to translate into a sustained uptrend. On the contrary, the increase in NVIDIA stock prices may present an attractive opportunity for opening short positions, with the expectation of another decline back to the 105 level. Given the current news environment, shareholders of IT companies should be prepared to lock in profits quickly.

Over the past three months, NVIDIA's market capitalization has decreased by nearly 20%, and from its January peak, it has dropped almost 30%. Although this performance isn't the worst among the 'Magnificent Seven,' it signifies a waning interest in high-tech US stock market shares. Analysts at Deutsche Bank note a significant shift in investor behavior towards European and Chinese securities.

Furthermore, Bloomberg experts observe a global decrease in enthusiasm for artificial intelligence (AI) technologies. Alibaba executives from China have stated that AI demand has not yet reached levels that justify the sharply increasing costs of necessary infrastructure. This view was indirectly corroborated by Microsoft's decision to consider pausing or canceling plans to build data centers in Europe and the US, worth $80 billion.

Bloomberg estimates that leading American corporations originally planned to invest more than $300 billion in AI and related technologies during the current fiscal year. A reduction in these planned expenditures could severely affect NVIDIA, which holds a de facto monopoly in many market segments. Barry Knapp of Ironsides Macroeconomics highlights the emerging dim prospects for AI investment returns as the overall US economic situation worsens.

The Stochastic indicator suggests current oversold conditions and the potential for an upward rebound in stock prices. ‘Bears’ may become active around the 115 mark, aiming for a price retreat back to the 105 level.

Consider the following trading strategy:

Sell Nvidia in the range of 110-115. Take profit – 105. Stop loss – 120.