As Nvidia stuffs up to report its latest quarterly earnings this week, one top technician give fair warns of pain ahead on the results.
Shares of the chipmaker have been on a cut, now up more than 64 percent in the past year.
However correspondence to Carter Worth, head of technical analysis at Cornerstone Macro, the range’s big run could be coming to end.
Worth first alludes to a chart of the PHLX semiconductor catalogue, which acts as a proxy for the broader semiconductor industry.
The index has mustered 27 percent in the past year and is a little more than 6 percent away from its all-time closely guarded high of 1,445.90, set during the dot-com bubble.
However, according to Value’s analysis, shares of the semiconductor group are now running into “an inherently tough level.”
“What we know here is that this level is in every respect the former high,” he said Friday on “Options Action.” “[Talking] on every side a double top prospectively, [which means] before you can exceed a high you odds-on contend with it.
In the past two years, the semiconductor index has surged assorted than 74 percent, more than double that of the S&P 500 which has rallied 29 percent in the in any case time period.
Despite the outperformance, Worth’s charting reveals that subordinate to to the broader markets the semiconductor index is beginning to show signs of a slowdown.
“What we grasp is that the semiconductor index has gone on to make new highs and yet the relative play to the S&P 500 has stayed stuck,” he said. “It’s deterioration any way you want to look at it.”
Comparatively, shares of Nvidia — which be suitable for up more than 8 percent of the semiconductor index — have soared assorted than 32 percent this year and are currently the second best-performing chip worn out in the group.
However, Worth noted that in the past couple of years, share ins of Nvidia have “ricocheted” off their upward trend line indicating the stock’s bullish momentum is now “stalling out.”
“Rather than looking feel attracted to a bounce off the line … it’s compressing and to my eye it looks like the beginning of what should be something sad,” he said. Shares of Nvidia hit a fresh all-time closing high of $266.91 in June but eat fallen 4 percent since.
“I want to bet that NVDA is going to do what Intel did and what some [of the] other big semis did — act rotten on earnings,” said Worth.
Shares of Nvidia rose slightly Monday to $256.12.