• Hot Stove Analysis

This technology stock is bouncing at its lows and recovering from its December dip.

Let’s examine a formation that just appeared on the NVIDIA (Nasdaq: NVDA) chart – and what it means going forward.

A “Bearish Engulfing Pattern” is a technical chart pattern that consists of a small white candlestick with short shadows (or tails) followed by a large black or red candlestick that eclipses or “engulfs” the small white one.

This formation signals that the bears have control of a security – and it gives you an early indication of a peak or slowdown in its advancement.

As you probably know, NVIDIA was a high-riser for most of 2018 but got hit hard in October, falling from a high of $280 to around $137. That’s a substantial haircut.

For a bottom to be established, NVIDIA may need to retest (and bounce) at lows around $124 before the bulls have enough confidence to dive back in. For now, it’s clear that the bears are still in control of the short-term direction, which remains lower.