NVIDIA – Facing A Technical Correction Test?NVIDIA CorpPEPPERSTONE:NVDAPepperstoneNVIDIA is a stock at the heart of the AI trade and while much has been made of AMD and Micron in recent weeks, it remains the benchmark against which all in the chipmaker sector are judged against. After a stellar run in May, June has been a volatile month for AI stocks which has seen NVIDIA in particular fall from a high of 231.79 on June 3rd down to a low of 189.54 on Monday, before recovering to its current level at 197.20. Monday’s drop to 2 month lows brings an interestingly technical level into play, which could have implications for not only the direction of NVIDIA stock but also the entire AI sector in general as we move forward into the early days and weeks of Q3. This technical update is outlined below and could be something worth monitoring through the important event risk tomorrow when Fed Chair Kevin Warsh speaks at 1400 BST and then on Thursday when the latest US jobs report is release at 1330 BST. Technical Update: Facing Technical Correction Test? When trading any market, there are times when important support or resistance levels are tested or even broken, which can lead to directional moves either up or down. NVIDIA’s share price has recently seen a strong sell‑off and has tested one of these possible levels at 191.84, equal to the 61.8% Fibonacci retracement of the March 30th to May 14th advance. Within the Fibonacci approach, three retracement levels are used after a phase of strength or weakness — 38.2%, 50%, and 61.8%. Looking at the NVIDIA chart above, each of these levels has recently played a role in highlighting potential of directional moves. The 208.63 level, which was the 38.2% Fibonacci retracement, initially held and prompted a bounce, but closing breaks on June 5th triggered weakness toward 200.17, the deeper 50% level. While this also held briefly, renewed weakness saw closing breaks lower that has now taken price to 191.84, the deeper 61.8% level. This illustrates how traders can use Fibonacci retracements to gauge whether a break of one support is occurring and to identify the next potential support, which in the case of NVIDIA, has been the next Fibonacci level. Fibonacci techniques suggest NVIDIA has again tested key support at 191.84, and traders may anticipate at least a recovery attempt from that point. However, they will also monitor closing defence of 191.84, as closing breaks lower could lead to further price declines. What are the Risks if 191.84 is Broken on a Closing Basis? A closing break below the 61.8% retracement can be a potential trigger. Some traders even suggest risks may turn toward a revisit to where the original move began, which for NVIDIA is 164.28, the March 30th session low. However, as the chart above shows, there are possible supports evident between the 191.84 and 164.28 levels. Therefore, closing breaks under 191.84 if seen, could result in price weakness, but earlier support levels might come into play. For instance, the April 10th low at 184.80 could be a focus on a downside break of 191.84, even then 180.33, the April 8th session extreme, possibly further. What if 191.84 Support Remains Intact on a Closing Basis? The 191.84 retracement is currently holding on a closing basis, and while this continues, risks may be for a more extended phase of price strength. In this case, traders may monitor 203.75, equal to the June 23rd session high. As the chart above shows, if closing breaks above 203.75 are seen, the next resistance might prove to be 206.04, which is the 38.2% retracement. If this level is then beached on a closing basis, focus could shift to 211.36, a level equal to the 50% Fibonacci retracement, possibly further. The material provided here has not been prepared accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Whilst it is not subject to any prohibition on dealing ahead of the dissemination of investment research, we will not seek to take any advantage before providing it to our clients. Pepperstone doesn’t represent that the material provided here is accurate, current or complete, and therefore shouldn’t be relied upon as such. The information, whether from a third party or not, isn’t to be considered as a recommendation; or an offer to buy or sell; or the solicitation of an offer to buy or sell any security, financial product or instrument; or to participate in any particular trading strategy. It does not take into account readers’ financial situation or investment objectives. We advise any readers of this content to seek their own advice. Without the approval of Pepperstone, reproduction or redistribution of this information isn’t permitted.