NVIDIA’s Stock Split and Potential Modification | decision point

Nvidia (NVDA) will experience a 10-1 split when the market opens on Monday, and it’s important to remember that one of the purposes of a stock split is to stimulate distribution. In other words, the lower price after the split attracts investors who avoid higher priced stocks (i.e. the little guys). Over the years, we have observed that price corrections frequently occur following stock splits. But Adam Johnson of Fox Business’s Bullseye American Ingenuity Fund, citing a study by Bank of America, found that stocks split more than 5-1 are, on average, 25% higher over the next 12 months than the rest. During the same period, the market rose only 12%. That may be true, but there may also be modifications on the cards.

The problem with NVDA is that it is up about 1100% since its 2022 lows in an extremely parabolic arc, and the parabolic arc is expected to eventually enter a correction. For general companies, the correction can be quite cruel, exceeding -50%. However, NVDA is currently one of the best companies of all time and if a correction occurs, we can expect a high level of consolidation, a sideways trading range. An example of this can be seen after the vertical rise at the beginning of the year, when NVDA corrected about -22% in March and April. There was another consolidation in 2023, including a -25% decline. And finally, in 2021-2022, before the magic of AI took hold, there was a -69% correction.

conclusion: Vertical advancement requires correction. For high-quality stocks like NVDA, all that’s usually needed is a relatively small downturn or consolidation. This is what we should be looking for sooner or later this year and there seems to be good support at 970.00. . . Oh, wait a minute. On Monday it will be 97.00.

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