Any Nice Chart Needs A Catalyst; Nvidia Has One

NVIDIA Corporation NVDA was a star performer in 2016, as it gained a massive 224 percent over the year.

Come 2017, the momentum slowed but did not falter. After a sedate performance through early May, the stock took off strongly, with the advance helping the stock clock a gain of 77.4 percent in the year-to-date period.

The performance may pale before the stock's showing in 2016, although it looks commendable compared to the broader market performance. The S&P 500 has risen only 9.54 percent in the year-to-date period.

Keep in mind, however, that much of Nvidia's gains in the past year came only in the second half.

Mini August Setback

In August, the stock saw a small pullback, as short seller Andrew Left of Citron Research issued a bearish call on the stock, premised on his view that the stock has run up too far, too fast.

Nvidia fell over 4 percent on Aug. 10 and lost an incremental 5 percent on Aug.11 to record a cumulative two-session decline of 9.4 percent over two sessions. Subsequently, the stock moved into a recovery mode.

See also: All The Nvidia Launches Thus Far This Year

Between Sept. 12 and Sept. 14, the stock traded in the range of $166.97 and $172.56 on an intra-day basis. On these three sessions, the stock closed at $169.61, $170.37 and $169.40, respectively, all within a dollar range.

In fact, in after hours last Thursday, the stock hit $172.56, although in regular trading, the stock closed at $169.40, down from the previous session's $170.37. The stock was merely consolidating at the top, without seeing a solid break-out.

Analyst Action Serves Up The Catalyst

With Evercore ISI analyst C.J. Muse bumping up his price target for Nvidia by a solid $70 from $180 to $250, the stock got a real push, moving out of the consolidation range and settled last Friday at $180.11, which was the high for the day and also a record closing high. The stock traded between $172.65 and $180.11 on Friday.

Muse's positive musings on Nvidia was based on the company's first mover advantage into the artificial intelligence space.

The stock carried over from where it left off last Friday and gap-opened up on Monday at $185.14, going onto hit the day's high of $190.10.

Meanwhile, on Monday, Bank of America Merrill Lynch analyst Vivek Arya lifted his price target for the shares of Nvidia from $185 to $210. Arya listed down multiple catalysts, including a surge in cloud capital expenditure, low investor interest and gaming momentum.

NVDA Source: Y Charts

The stock is currently trading off its day's high, although it looks right on track to record another closing high. If not for the analyst action on Friday, the stock may not have had a clear break out from its trading range.

In the near term, the stock's 50-day moving average (currently at $165.13) could serve as a strong support.

Joel Elconin contributed to this article.

Related Link: Looking Beyond The Shiny Surface Of Nvidia's Big Q2 Beat