What you need to know
- Supermicro’s stock jumped by nearly 30 percent on Monday following the announcement that an independent examination of its financial practices had found no fault.
- Stock has recovered the lower trendline from a broadening descending formation in place since early March, when the stock peaked.
- Investors should watch key overhead areas on Supermicro's weekly chart around $50, $64, and $97, while monitoring major support levels near $30 and $23.
Super Micro Computer’s (SMCI), a struggling server manufacturer, announced Monday that an independent audit of its accounting procedures found no fault.
Allegations that accounting anomalies existed earlier this year caused the filing of several financial statements to be delayed. These fears were exacerbated by the resignation of Nasdaq’s auditor, which occurred in October.
Stocks in the artificial intelligence darling, which peaked at the beginning of March, have more than doubled since the month-end low. This is after the company announced its new auditor and filed with Nasdaq a compliance program. It also added that they now expect to be able file their delayed financial results.
Supermicro shares rose 29% to $42 in Monday's regular session, before adding another 4% in extended trading.
Here, we analyze the Supermicro weekly chart in detail and identify key levels of price that are worth monitoring.
Descending Broadening Formation
Supermicro’s shares, which formed a beartrap last month, have since continued their upward movement, taking back the lower trendline from a formation of ascending broadening that had been active on the chart ever since it peaked in early March.
Above-average trading volume has supported the upward trend, showing that institutional investors and other large market players are buying. Although the relative strength (RSI) is still below 50 it has continued to climb, signaling an improvement in price momentum.
On Supermicro’s chart, let’s look for key overhead areas that investors might be looking at. Let’s also examine two important support levels during retracements.
The Key Areas Above the Roofline to Keep Watch
Investors should first watch the $50 mark as a level of resistance. Near the round psychological number and close to the early August lows and late October peaks, this area of the chart may provide some resistance.
The shares could climb as high as $64 if they close decisively above this level. This is the area on the chart that may see selling pressure around the countertrend peak of August. This area is also aligned with the moving average of 50 weeks.
More positive price movements could fuel an upswing to around $97. At this point, investors could find exits near the peaks of the chart just below the record March high.
Monitor Major Support Levels
First, the $30 level is a major support. Investors could look to buy near the top of the five-month trendline formed between August last year and December this year.
Supermicro could also retrace its shares to the level of $23 in case a significant drop occurs. The area on the chart that is slightly below 200-week MA would provide support at the lower trendline mentioned earlier.
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