Why NVIDIA Pulled Back After the Split

Are retail buyers salivating over soon to be an affordable $120 per share of NVIDIA? Or will they wisely wait for inevitably cheaper prices?

Since unfathomable possibility hit the markets around chatter over artificial intelligence, big boys have been scarfing up shares of this AI hottie at $800 to $1000 a pop. A frenzy. Even before wrinkles could be ironed out on which deep learning neural network models to employ, artificial intelligence chip designs began streaming through ISO Class 5 clean-rooms that guarantee no more than 3,520 particles at ≥0.5 µm per cubic meter on NVIDIA’s manufacturing floor.

Now, those buyers are sitting on over 100% profit inside of six months, while NVIDIA draws even more value to the stock by attracting retail buyers with a 10 for 1 Split! This market is currently trading 50 Million shares per day at $1,200 per share, soon to become more than 500 Million shares traded in a day. How will they play it, the split?

Investment bankers and hedge funds are staring down the barrel at an opportunity to “lock it in” — an immense profit. What does this mean for the retail buyers?

The well known Jim Cramer has explained the chess game of news and markets from his old hedge fund days.

There would be an exchange of shares from smart money Big Boys to a flood of frantic retail players. This incipient demand would undoubtedly produce an initial tick higher but very possibly a pull-back and consolidation.

The Market knows and she may have already tipped her hand that a pull-back would be the logical next step for NVIDIA to establish a sound base prior to the launch of Elliott’s next upwave – Wave 3 !

In mildly technical terms, the chart above shows STOCHASTIC lines struggling to separate in concert with the NVDA rally. A Stochastic signal line which has drawn "Close n Parallel" to the 5-period line, having difficulty pulling away is a form of divergence from price vaulting higher. Technicians and chartists know this to be disagreement between Price and Technicals, otherwise known as technical weakness. Likewise, Williams% in a "float" shy of the upper "0" extreme is a form or divergence which issues an equivalent "tell" -- a Indicator's warning of weakness or disagreement from Price.

Granted, with customers like Microsoft (15%), Meta (13%) Amazon (6%), and Alphabet (6%), the AI market is hot.

And now the highly speculative AI market is about to see a flood of retail buyer traffic salivating over an affordable $120 per share of NVIDIA.

Meanwhile, news channels are pouring gasoline on the fire. But smart money sitting on unprecedented short-term gains, able to steer down a very long road and wanting to accumulate at lower prices, may have other more rational ideas than to push NVIDIA prices higher at this juncture. And surely the Big Boys know opportunity when they see it, to lock in flash profits, slow this train down, and accumulate.

Perhaps retailers should take a hint from these market tells. Cooler heads would shun the temptation to pile into NVIDIA’s overheated Price momentum. A common strategy employed by investors and traders alike is “wait for the pull-back”, which NVIDIA chart technical tells suggest is imminent.

Retailers, the AI train has barely even left the station and has a long run ahead of it. What’s the hurry? Accumulate. “Take profits, pull-back, and wait for lower prices” might just be the ploy of the Big Boys. And so should be the plan of wise bargain hunters. And most intriguing is that the Market has already tipped her hand to reveal her intentions!

Historically, stocks have notched 25% total returns in the 12 months following announcement of a stock split. This is compared to 12 to 15% for the broad index average rate of return. And almost anyone watching AI knows NVIDIA has announced just such a split from $1,200 per share to an affordable $120, almost fortuitously for retail buyers who were previously shut-out of the game until now!

Close n Parallel: Example of Price-Indicator Divergence

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