A trading expert has issued a bearish forecast for Nvidia (NASDAQ: NVDA), warning that the stock's technical structure signals a potential correction that could see shares fall from current levels near $215 down to $160. The analysis, published on TradingView by the pseudonymous trader TradingShot, highlights similarities between Nvidia's current price action and patterns that preceded sharp pullbacks in the past.

Nvidia has been a standout performer in the stock market, driven by its dominant position in the artificial intelligence chip market. The company's data center business, which accounts for the majority of its revenue, has seen explosive growth as tech giants and enterprises race to deploy AI infrastructure. However, even strong fundamentals do not always protect a stock from technical corrections, and the current chart setup suggests Nvidia may be due for a significant pullback.

Technical indicators flash warning

The analysis focuses on Nvidia's weekly Relative Strength Index (RSI), a momentum oscillator that measures the speed and change of price movements. According to TradingShot, the RSI is currently in a setup similar to early November 2024, just before Nvidia experienced a steep decline. Additionally, the stock has formed a pattern of higher highs near the top of its rising trend line, a structure that previously preceded a sharp reversal.

Weekly RSI readings above 70 are typically considered overbought, but extreme levels can persist in strong trends. However, when the RSI diverges from price or forms bearish patterns, it often signals an impending reversal. In Nvidia's case, the analyst notes that the RSI is showing signs of exhaustion, which could lead to a move lower.

Projecting based on the current technical structure, TradingShot expects the decline could extend into late July 2026, with Nvidia potentially retracing toward its 100-week moving average (MA). The 100-week MA has historically acted as strong support, most notably during the 2025 correction before the stock resumed its broader uptrend. At current levels, the 100-week MA is approximately near $160, which would represent a roughly 26% decline from today's price.

Earnings beat fails to lift stock

The bearish outlook comes despite Nvidia reporting another blockbuster quarter. For fiscal Q1 2027, the company posted record revenue of $81.6 billion, up 85% year-over-year and 20% from the previous quarter. The data center segment alone generated $75.2 billion in revenue, underscoring the insatiable demand for Nvidia's AI chips. Adjusted earnings per share came in at $1.87, beating consensus estimates of approximately $1.76. Free cash flow hit a record $49 billion, and the company raised its quarterly dividend to $0.25 per share while approving an additional $80 billion share buyback program.

For the current quarter, Nvidia guided revenue of roughly $91 billion, above Wall Street expectations of $87 billion. Despite these impressive numbers, the stock slipped after earnings in a classic "sell the news" reaction, pulling back from recent highs near $236. This pattern has become common for Nvidia: the stock tends to rally ahead of earnings as investors anticipate strong results, leaving limited room for further upside after the announcement.

Historical patterns and market context

The technical analysis points to a broader trend where Nvidia's stock often exhibits volatility following extended rallies. The 100-week moving average has been a reliable support level in the past, and a test of that level would not be unusual given the stock's rapid appreciation over the past two years. From its 2022 lows, Nvidia has gained over 1,000%, and even a 26% correction would still leave shares well above long-term support.

Market participants are also weighing the impact of macroeconomic factors, including interest rate expectations, geopolitical tensions, and the sustainability of AI spending. While Nvidia's earnings remain stellar, some investors worry that the market has already priced in years of growth. The technical warning from TradingShot adds to a cautious sentiment among some traders.

The analyst also highlights the importance of the weekly RSI support near 35.50. If that level breaks down, it could open the door for an even deeper correction. As of the latest data, the RSI is above 60, but a decline to the 35-40 range would be consistent with a major pullback.

What the $160 target means for investors

A drop to $160 would bring Nvidia's valuation down significantly, potentially creating an attractive entry point for long-term investors. The company's forward price-to-earnings ratio, based on current estimates, would compress into the mid-20s from the mid-30s today. For many value-oriented investors, such a valuation could be compelling given Nvidia's growth trajectory.

However, the timing of any correction remains uncertain. Technical analysis is not a precise predictor, and the market could defy the bearish signal if AI demand continues to accelerate or if Nvidia announces new products that reignite enthusiasm. The analyst's projection of a decline into late July 2026 is simply a pattern-based estimate, not a guarantee.

In the meantime, Nvidia remains the dominant force in AI computing, with its Hopper and subsequent architectures powering the majority of large language models and generative AI applications. The company's ecosystem, including its CUDA software platform, creates high switching costs for customers. These competitive advantages support the long-term bullish thesis, even if short-term volatility increases.

Overall, the warning from TradingShot serves as a reminder that even the strongest stocks experience corrections. For traders and investors monitoring Nvidia, the key levels to watch are the $200 support and the $160 area near the 100-week moving average. A move below $200 would confirm the bearish bias, while a hold above that level could negate the pattern. As always, a well-diversified approach and risk management are advised in the face of such uncertainty.

Source:Finbold News