Nvidia (NVDA) shares are currently under the spotlight as the company prepares to unveil its highly awaited earnings report post-Wednesday market close.

This chip manufacturing powerhouse has consistently surpassed Wall Street projections, driven by robust demand for its AI technology. Analysts are predicting a notable 73% increase in revenue for the fourth quarter compared to last year, estimating a net income of $21.08 billion, up from $12.84 billion in the prior period.

While Nvidia shares are flat year-to-date, they have appreciated by 12% this month through Friday’s close. Analysts remain generally optimistic about the company’s outlook as major tech firms continue to increase their investments in AI infrastructure. The share price dipped 4.1% to $134.43 on Friday amid a broader market sell-off.

In the following sections, we will delve deeper into Nvidia’s chart and apply technical analysis to pinpoint vital price levels to watch.

Shares Trading Within a Descending Channel

Nvidia shares have been trading within a descending channel since mid-December, with a noted decrease in trading volumes during this time.

Recently, a bearish engulfing pattern was identified on the Friday chart, hinting at a possible decline prior to the earnings report. This particular candlestick pattern has emerged twice prior, following the previous peak in early January, both times preceding additional selling pressure.

Additionally, the relative strength index (RSI) has mirrored the price activity, registering lower highs since the beginning of the descending channel, which suggests a decline in buying momentum.

Let’s identify several significant support and resistance zones on Nvidia’s chart that traders may be monitoring.

Important Support Levels to Monitor

One crucial lower level to observe is around $130, where shares might find support near a trendline connecting the significant August high with troughs seen in December and January.

A decline below this point could result in a drop to around the $113 mark, which offers potential buying opportunities close to this month’s swing low. This region aligns with various trading levels observed since last May, also positioned just above a projected target that reflects the stock’s downward move experienced in late January from the descending channel’s top trendline.

A more significant post-earnings decline in Nvidia shares could shift focus to the $102 level, an area that may serve as support near the opening price of the late May breakaway gap, coinciding with several prices around the lows from August and September.

Key Resistance Levels to Observe

A potential breakout above the upper trendline of the descending channel may see the shares approach the $153 level again, which is likely to present significant overhead resistance near the stock’s all-time high (ATH).

Investors may also project a bullish objective beyond the ATH using the measuring move technique, sometimes referred to as the measuring principle.

To implement this analysis, we determine the width of the descending channel in points and add that value to the top trendline of the pattern. For instance, we would add $32 to $142, resulting in a target of $174, a level nearly 30% above Friday’s closing price, where investors might consider locking in gains.

The insights, assessments, and recommendations provided on Investopedia are intended for informational purposes only. Please review our warranty and liability disclaimer for additional details.

As of the date of this article, the author has no ownership interests in any of the aforementioned securities.