Nvidia (NVDA)
The demand for the newest generation of Nvidia’s Blackwell chip is strong. According to Morgan Stanley, after meeting with management said that the Blackwell GPU is fully booked for the next one year and is progressing on schedule. Nvidia CEO, Jensen Huang, had also earlier stated that the demand for Blackwell is “insane.” The supply chain data also points favorably as Foxconn is building a new facility in Mexico for Blackwell orders. Foxconn Chairman said that the capacity would be “very, very enormous”.
The fundamental story is intact and strong for NVDA, which is why the technical setup is somewhat contrarian. As growth investors, sentiment can drive a stock in the opposite direction suggested by the fundamentals over the short to intermediate time frame. This may be what is playing out for Nvidia today.
The technical pattern since the June high best resembles a large degree correction that is still playing out. Note the 3 waves down from the June high. This, so far, has been followed by a 3 wave bounce that has made lower highs. If we are in a large degree correction, then we should see the final drop into the $90 – $70 range in the coming weeks. This scenario is marked in red in the chart below.
The alternative interpretation of the price action is presented in green. If this is playing out, we are in the middle of a 5th wave push to new highs. The pattern would have to be an ending diagonal, which is typically a 5 wave pattern that consists of large swings in both directions. If this is playing out then any further weakness should hold over $120 – $114, and then breakout to new all-time highs over $141. A break below $114 will confirm the red count, as we set up targets to buy around the August low.
Taiwan Semiconductor (TSM)
TSM has a similar setup as NVDA. Strong revenue growth is expected in the coming quarters due to the robust demand for AI and smartphone chips. We have recently discussed the stock here. However, the technical setup suggests that we could see one more leg lower before the larger uptrend resumes.
We have a 3 wave bounce off the August low that is stalling at the highs. The most common interpretation of this 3 wave bounce is a corrective bounce within a larger correction. If this is instead a bullish pattern, it will also be in the form of an ending diagonal pattern. As long as any further weakness holds $179 – $176 and then definitely push towards the $225 region next, then the bullish scenario remains a viable path. If we break below $176, then we are heading back to the August lows.
Bitcoin (BTCUSD)
Bitcoin appears to be setting up for a breakout to all time highs. Note price breaking above the downtrend line. This pattern is also in the form of an ending diagonal that is targeting $78,000 – $86,000. If we fail to definitely break above the downtrend line, any additional weakness must hold over $58,500. Below this level and the correction that started in March will have one more drop before completing.
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