NVIDIA Corporation NVDA The stock surged on Tuesday after reports that Chief Executive Officer Jensen Huang had completed a sale of shares in the company under a trading plan sooner than expected.
Hwang’s early withdrawal from the Rule 10b5-1 trading plan, which was originally scheduled to run until March 2025, coincides with a key technical pattern that signals a shift in investor sentiment and signals underlying confidence in the market.
Many technical analysts do not understand that technical analysis is, or should be, the study of investor and trader psychology. Misled by these misinformation, analysts look at charts and try to identify patterns without understanding the dynamics and price movements that form those patterns.
Ascending and descending triangles are traditional technical analysis patterns that tend to be reliable. Both are visible on Nvidia’s chart, which is why it’s our stock of the day.
In June and July, a “descending triangle” formed on NVIDIA’s charts, a pattern that indicates aggressive sellers and complacent or patient buyers.
The buyers were willing to wait for the sellers to come in. They were content to remain near the $123 level, which over time caused the lower support line of the pattern to flatten out.
However, during the same period, the sellers became more aggressive and tried to sell at lower prices, which is why the resistance line at the top of the pattern sloped down or downwards.
Aggressive selling and patient buying creates the foundation for a stock to fall, which is why a descending triangle is a bearish pattern, suggesting that NVIDIA will break out of support and fall, which is exactly what happened.
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Currently, an ascending triangle pattern is forming on the chart, which is a counter movement forming a descending triangle pattern.
In this case, it is the sellers who are holding out as time goes on. They are holding the price back and waiting for the buyers to come in. This is why we see a horizontal resistance at the top of the pattern.
However, during the same period, buyers were becoming increasingly aggressive and were willing to pay higher prices, which is why the support line of the pattern is rising or sloping upwards.
Aggressive buyers and patient sellers are a trending bullish dynamic for the market, which means NVIDIA could potentially break out of the resistance near the $123 mark and rise.
Technical analysis, when properly understood and applied, is the study of the psychology of investors and traders.
A descending triangle indicates aggressive sellers and conservative buyers and is often the catalyst for a decline, while an ascending triangle indicates aggressive buyers and conservative sellers and can lead to an uptrend.
Successful traders understand the psychology and price action that shapes technical analysis patterns on the charts – this is why they make profits.
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