Adding Nvidia To Our New 2024 Model Portfolio (Technical Analysis, Upgrade)

Summary:

• This is a technical analysis article. In our previous article on Nvidia Corporation stock, we focused on our proprietary Buy Signal and adding it to our Model Portfolio.
• We did not get the pullback in Nvidia that we were looking for, so that we could buy on weakness.
• Now Nvidia Corporation stock justifies its overvaluation after the extraordinary earnings report. Most analysts have raised their targets substantially.
• Seeking Alpha’s quantitative ratings were good for Profitability, Growth, Revisions and Momentum before the earnings explosion.
• Aggressive growth stocks are always overvalued, so we accept poor valuation provided the growth is great.

Nvidia Corporation (NASDAQ:NVDA) makes the chip for Artificial Intelligence, AI, and its earnings just exploded. Analysts are raising their targets substantially, having completely missed the explosion of the latest earnings report. In our previous article, we focused on our proprietary Stocks In Demand, SID Buy Signal, and we were anticipating a pullback to allow us to buy on weakness. That has not happened. So now we are accepting the Valuation low grade because it has good grades in Growth, Revisions, Momentum and Profitability according to Seeking Alpha quant ratings. Congrats to Seeking Alpha for having these high ratings before this extraordinary Q1 FY2024 earnings report.

Aggressive growth stocks like NVDA are usually overvalued. Aggressive growth portfolio managers are used to living with overvalued stocks in their portfolio because of the future growth. That is why they hold overvalued stocks like NVDA in their portfolio. They are not Value Portfolio Managers.

The question that aggressive growth portfolio managers are facing today is when to add to their position. They cannot chase price higher, so they cannot bid price up. Only traders and small investors do that, and those shorts that are being squeezed. We can assume that any shorts have already covered by buying NVDA at today’s price. Aggressive portfolio managers will use any pullback in the Index to buy NVDA on any weakness created by a weak market. A debt default would certainly provide that opportunity for them to buy on weakness. So would a war over Taiwan or the Fed raising interest rates.

In my previous article, I also pointed out our view that we expect the market to drop during the next six months, not only because they are the worst months for the market, but also because the Fed is going to keep rates high. Jamie Dimon has even mentioned 6% or 7%. The market has not discounted interest rates that high. If the Fed goes there, the market will drop.

The price of Nvidia Corporation stock may not drop very much during the coming market pullback, but Index selling will provide the supply that portfolio managers need to buy in size. They will wait for weakness to buy because they have no choice. They have to wait for supply to buy, and that is why our system keeps track of demand and supply. We know that when the supply shows up on our charts, the portfolio managers will have to come in and buy. That means the price of NVDA is not likely to drop very much. That is why we are adding it to our new 2024 Model Portfolio at these prices. Unlike the portfolio managers, we are not buying in size. We are not going to move the market.

Here is the NVDA chart updated from our last article. At the top of the chart you can see our proprietary SID Buy Signal that uses both fundamentals and technicals. It is at the top of the chart. The rest of the signals on this chart are purely technical, and you can see that the technical buy signals lead our lagging SID signal. But our lagging SID signal gives us much more confidence in the future than our leading technical signals, which can reverse quickly.

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Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, but may initiate a beneficial Long position through a purchase of the stock, or the purchase of call options or similar derivatives in NVDA over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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