We were just asked: “Is Nvidia Corp. (NVDA) Still Cheap?” – and we concluded the math says yes, even if growth estimates were cut in half. But is the Nvidia technical washout a buy? And how do you trade it without catching the proverbial falling knife? Here’s my take, says Lance Roberts, editor of the Bull Bear Report.
Technically, the selling has reached a genuine extreme. NVDA recently fell 18.3% in five sessions and closed 29.4% below its Oct. 6 record of $239.24. The 14-day RSI hit 24 on Tuesday, its most oversold daily reading since at least mid-2024 and deeper than the April 2025 tariff low. Price closed 2.5 standard deviations below its 20-day average and 17.4% under its 200-DMA at $204.54.
But oversold is NOT the same as washed out. The weekly RSI recently sat at 34, so the longer-term selling hasn’t exhausted itself. The March 30 low of $164.27 is the line that matters. Bob Farrell’s Rule #2 says that excesses in one direction lead to an opposite excess in the other direction. October’s euphoria bought us this overshoot, and overshoots rarely end on the first bounce.
That is why we scale in rather than swing for the fences. Buy the washout in thirds, let the tape confirm each step, and keep one stop for the whole position.
Also keep the total position small until the trend repairs. Size it so being wrong costs you a tranche, not a year of returns. The knife doesn’t care what you paid for it.
