By Victor Reklaitis, MarketWatch
A soaring tech stock has sketched out “the perfect chart pattern,” according to Cornerstone Macro’s Carter Braxton Worth.
“And that means, of course, it is time to sell,” Worth said.
The stock that he is expecting to slump is Nvidia Corp. /zigman2/quotes/200467500/composite NVDA -0.85% — a Silicon Valley-based maker of graphics chips.
Nvidia is up 107% so far this year as of Tuesday’s close, helped by enthusiasm over its bets on self-driving cars and “deep learning.” Chip stocks in general are viewed as one of the stock market’s hottest areas at the moment.
But Worth, a technical analyst, has argued that Nvidia is now due for a drop based on how its stock chart looks at the moment.
“The uninterrupted ascent of the past 8 months, without any check backs to the smoothing mechanism (the 150-day moving average) is/has been extraordinary and without flaw,” he wrote in a note dated Wednesday.
“Indeed, the stock is trading some 42.3% above its smoothing mechanism at present, a level from which meaningful selloffs have taken place,” he added.
“The idea, of course, is to do some selling now, before — as they say —someone does it for you.”
Nvidia’s stock — time to come back to earth?
The chart for Nvidia above comes from Worth’s missive — which initially does not give the company’s name and ticker, but then later reveals all. The red line is the stock’s 150-day moving average .