Key Takeaways
- Supermicro shares whipsawed in extended trading on Tuesday after the troubled server maker said it expects to submit its delayed 2024 financial reports by the Nasdaq’s Feb. 25 deadline.
- Meeting that deadline will help the company to avoid being delisted and shore up investor confidence in the stock.
- The stock broke out above the top trendline of a descending broadening formation last Friday, potentially also forming an inverse head and shoulders bottoming pattern in the process.
- Investors should monitor important overhead areas on Supermicro’s chart around $50, $70, and $96 while also watching key support levels near $26 and $18.
Super Micro Computer (SMCI) shares popped 8% in extended trading Tuesday after the troubled server maker said it expects to submit its delayed 2024 financial reports by the Nasdaq’s Feb. 25 deadline to avoid being delisted.
This development overshadowed the company’s underwhelming preliminary second-quarter results. It also shored up investors’ confidence in the stock, laying to rest concerns that the server maker may not meet the exchange’s cutoff date after a plethora of accounting and corporate governance issues were unearthed during the second half of last year.
Its been a wild ride for the Supermicro stock which lost nearly 10% during regular trading hours Tuesday and began after-hours trading in the red before whipsawing. The company’s shares have fallen around 6% in the last month but have surged more than 35% in February as of Tuesday’s close in anticipation of this update. However, the stock has lost nearly half its value over the past year.
Below, we break down the technicals on Supermicro’s chart and identify important price levels that investors may be watching.
Descending Broadening Wedge Breakout
Supermicro shares broke out above the top trendline of a descending broadening formation last Friday, potentially also forming an inverse head and shoulders bottoming pattern in the process.
Importantly, the stock registered its highest volume in recent trading session since early December, indicating larger market participants positioning ahead of this afternoon’s update.
While the relative strength index (RSI) edged lower after today’s fall in regular trading, the indicator still confirms bullish price momentum with a reading just below the overbought threshold.
Let’s apply technical analysis to identify important overhead areas where the shares could run into resistance and also point out key support levels worth watching during pullbacks.
Important Overhead Areas in Play
The first overhead area to track sits around the psychological $50 level. This region on the chart could provide resistance near the inverse head and shoulders’ neckline, which also lies in close proximity to the downward sloping 200-day moving average.
A decisive breakout above this price would confirm the pattern, which could propel a move to around $70. Investors may look to offload shares around this level near the February 2024 pullback low and late-April trough.
Follow-through buying could see the shares rally to the $96 level, an area that may provide resistance near a trendline that connects a series of peaks on the chart between February and July last year.
Key Support Levels to Watch
During retracements, investors should keep tabs of the $26 level. Supermicro bulls could look for buying opportunities in this region near the low of the inverse head and shoulders’ right shoulder.
Finally, a more significant downside reversal in the stock could see the shares revisit lower support around $18. Investors who try to time market bottoms may seek entry points near last year’s November low, which also doubles and the inverse head and shoulders’ head.
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