January 10, 2025 | Market on Edge: Is Nvidia Signaling a Bigger Pullback Ahead?

Let’s start with the hottest stock in the hottest sector of the market. Nvidia just unveiled its new compact AI superchip, the GB10, and its stock soared to a record high of $153.13 at yesterday’s open. It’s a textbook example of a meteoric rise.

But it turns out it was the classic rally on the hype of a new product. The stock quickly reversed, dropping $13.12 from peak to trough. It created an ‘outside reversal’ (circled), where the stock opened higher than previous day day, but closed much lower at $140.14 – a very bearish signal. We need to watch this carefully!

That move is very bearish and was the biggest single day pullback in NVIDIA’s history. We need to see if this is the start of a telling correction in the stock market rock star which has led the big 2024 rally.

What we are watching is to see if NIVDA breaks down below that lower rung (green diagonal line) of its wedge pattern. If it does, then we could see NIVIDA have a significant correction (purple dotted line).

Secondly, we want to revisit the Head & Shoulders pattern we highlighted on January 2nd.

Back then, we noted that if the right shoulder of the S&P 500 breaks below the neckline (green dotted line), it could signal a significant correction in the markets.

This remains a key level to watch. A breakdown below the neckline (potential move highlighted by purple dotted lines)  would confirm the pattern and could set the stage for a broader market pullback. Keep an eye on this critical support level!

While there’s no guarantee either scenario will play out, if NVIDIA breaks down, it could drag the rest of the market down with it.

Stay tuned!

Martin Straith January 10th, 2025

Posted In: The Trend Letter

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