Bearish crossovers have preceded further weakness in Nvidia’s stock 75% of the time, and by an average decline of 41%

A bearish “death cross” pattern is forming in Nvidia’s stock chart, which could spook some investors looking to buy on the recent dip.

For investors looking for a time and reason to jump back into Nvidia Corp.’s stock, there’s a pattern looming in the charts that may scare them off, for at least a while longer.

That’s because the last two times the bearish pattern appeared, the stock fell roughly another 40% before it bottomed. Over the stock’s public history, the selloff continued 75% of the times the pattern popped up.

The pattern in question is known as a “death cross.” That’s when the 50-day moving average, a widely followed short-term trend tracker, crosses below the closely followed 200-DMA, which is viewed as a dividing line between longer-term uptrends and downtrends.

For Nvidia’s stock, that bearish pattern could appear for the first time in about three years as early as this week — likely on Friday, based on the current trajectories of the moving averages.

Photo: FactSet, MarketWatch

The 50-DMA currently comes in at about 129 on Monday according to FactSet data, down from $129.30 on Friday, and falling by an average of 30 cents a day over the past five days. Meanwhile, the 200-DMA rose to $127.67 from $127.64 on Friday, and has been rising by about 6 cents a day over the past week.

Of course, the trajectories of the moving averages could change, as some believe this week’s annual GTC conference for developers might provide fuel for further gains.

The stock surged 5.3% to close at $121.67 on Friday. It has climbed 13.7% since it closed at a six-month low on March 10, but has still tumbled 18.6% since the Jan. 6 record close. The shares closed lower 1.8% at $119.53 on Monday.

The last death cross appeared on April 20, 2022, when the stock closed at a split-adjusted $21.48. After the stock had already fallen 35.7% from its record close of $33.38 on Nov. 29, 2021, it sank another 47.7% before it bottomed on Oct. 14, 2022.

Photo: FactSet, MarketWatch

The one before that appeared on Nov. 13, 2018, after it had already tumbled 31.1% from a record close seen about six weeks earlier.

The stock slid another 36.1% before it bottomed about six weeks later.

Photo: FactSet, MarketWatch

Since Nvidia went public in January 1999, there have been 12 death crosses. The stock has fallen further after nine of them, for an average decline of 41% (median decline of 36%). The declines ranged from 6.5%, after a May 4, 2012 crossover to 78% after the April 24, 2002 death cross.

The time spent between the death crosses and the bottoms ranged from as little as a week to nine months.

For the times the stock didn’t fall after the crosses, it had bottomed two days before one appeared on Jul 29, 2015, it had bottomed a month before the April 25, 2007 crossover and hit bottom four days after the one that appeared on July 20, 2006.

If there is a bright side to the stock’s current setup, the stock looks pretty cheap, compared with the consensus analyst expectations of per-share earnings over the next 12 months.

That price-to-earnings, or P/E ratio, currently comes in at around 25.9, up from a recent low of 23.4 hit earlier this week.

Photo: FactSet, MarketWatch

When the last death cross appeared, which led to a further selloff in the stock, the P/E ratio was significantly higher, at 36.7. And the last time a death cross appeared (July 2015), after the stock had already bottomed, the P/E ratio was lower, at 22.3.