Stanley Druckenmiller ditches Nvidia stock: Time to sell?

Billionaire investor and founder of Duquesne Capital, Stanley Druckenmiller's recent move to slash his Nvidia Corp. (NASDAQ:NVDA) stake by 72% in Q1 2024 has piqued investors’ interest. Druckenmiller, who was among the early investors to recognize the potential of Nvidia in the AI realm, sold 441,551 shares of Nvidia or 72% of his holding in the company during Q1 2024.

Druckenmiller initially invested in Nvidia back in Q4 2022 when shares were around $184, but sold a significant portion as the stock surged. Despite the reduction, Nvidia remains a significant position in Druckenmiller's portfolio, ranking as his 7th largest holding with a value of approximately $159 million as of March 31.

Nvidia's fundamentals are robust, with the company dominating the AI space, boasting an 80% market share in GPUs. Its latest earnings report showed remarkable growth, beating revenue estimates by $1.5 billion, with a 265% year-over-year increase in revenue and a surge in non-GAAP EPS. Strategic partnerships with Meta Platforms and Tesla further strengthen its position.

From a valuation standpoint, some investors have expressed concerns about Nvidia's seemingly high valuation metrics compared to its peers. However, a lot of analysts think that Nvidia's valuation is justified by its robust growth prospects and technological superiority. Additionally, Nvidia's aggressive investment in R&D, exemplified by the recent unveiling of its disruptive Blackwell architecture, is being cited by analysts as something that’ll help the company maintain its competitive edge and drive future growth.

Despite Mr Druckenmiller's move to trim his stake, Nvidia's stock warrants a closer examination. In the next sections, we'll delve into a detailed technical analysis of Nvidia's stock, focusing on key chart patterns and indicators to assess its trajectory in the current market environment.

Q1 results: The deciding factor for the stock’s direction

In Nvidia’s medium-term chart, we can see the strong momentum the stock exhibited during the first quarter of this year when it doubled from $480 to above $960 levels. That momentum ended in March and with the sudden collapse in the stock’s price in April it seemed the rally was going to retrace.

However, that’s not the case. Since the start of this month, the stock has again exhibited strong upside momentum and is currently trading in the vicinity of its all-time high. Going into earnings, this is a good sign for investors who are holding the stock from lower levels.

NVDA chart by TradingView

On the charts, we can also see that the stock has largely moved in a $800-$970 range since March, which implies that even though it has regained bullish momentum it will need additional catalyst if it has to break free from this range. Since the company is expected to report its Q1 results on May 22^nd, that is the near-term catalyst investors should watch out for.

Traders who are bullish on the stock must wait for it to cross above $970 and give a daily closing above it before initiating a long position. If it manages to do that, they can go long while keeping a stop loss a few cents below $840 an initial profit target of $1,048 and a second profit target of $1,128.

Traders who are bearish on the stock, must ideally not short the stock at current levels as it displays strong upward strength. If they want, they can buy Put options of $950 strike of Nvidia going into earnings. This will limit their losses and can result in a windfall if the company disappoints with its earnings or guidance.