The Key Takeaways
- Supermicro gained in premarket trade on Monday following a nearly 80% increase last week as the server maker recovered from an unsettling stretch.
- Recent gains are a result of the Nasdaq filing a compliance plan on Monday in order to avoid delisting. Nvidia also made a reference during the earnings call by the chipmaker, which was a fan favorite for AI.
- Supermicro shares dropped below their support levels earlier this month. They then reversed direction, creating a bear trap.
- The relative strength index has crossed above 50 to confirm improving momentum, but sits below overbought territory, giving the price ample room to test higher prices.
- Investors should monitor important resistance areas on Supermicro's chart around $39, $50, and $64, while also watching a key support level near $23.
Super Micro Computer’s (SMCI), the server manufacturer that has faced a lot of turmoil, recovered from a tough period by gaining ground on premarket trade on Monday.
In addition to the recent gains, the Nasdaq has also mentioned Nvidia in its earnings call this Wednesday.
Stocks are still more than 70% lower in price compared to their March peak, despite the surge last week. Stocks had fallen in response to several corporate governance and accounting issues, which led, among other things, to the resignation and delay of filing several financial reports.
In recent premarket trades, the stock rose 7% to $35.50.
We will examine Supermicro’s price chart in detail and apply technical analysis to determine important levels.
Bear Traps: Potential Bear Trap
Supermicro’s shares fell below the support level earlier in this month, before quickly reversing course to recover the important technical level. This creates an opportunity for a bear trap. It is a chart that can lure investors to sell or open a short before the market recovers and causes a loss.
A strong buy-side has supported the recent stock recovery with above average trading volumes. Moreover, relative strength (RSI), which confirms improving momentum but is still below overbought, gives the stock plenty of room to reach higher prices.
Look ahead and identify the three key resistance levels on Supermicro’s chart that you should monitor to see if it continues to move up. Also, note an important level of support to keep in mind during retracements.
Watch out for important areas of resistance
After Friday’s closed above the trendline, the price of the stock may rise to about $39. Investors could look for opportunities to sell near the September or October troughs. The 50-day moving is also located in this region.
Near $50 is the next level of interest. This area on the chart could be a place where the round psychological number, early August’s trough, and the upper part of the consolidation phase that began in October, may create overhead resistance.
The shares could climb up to $64 in a more bullish upward move, which would be 93% over Friday’s price. This chart area could be a target for selling depending on when the price moves.
Keep an eye on the Key Support Level
Supermicro could retest its key support level of $23 if it retraced. Investors could look for an entry point at this area near a line that connects the series of swing lows which formed last year on the chart between August to October.
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According to the article, as of its date of publication, the author did not hold any of these securities.
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