Key Takeaways
- Super Micro Computer shares surged in early trading on Tuesday, adding to a 11% gain yesterday. Investors bid up the server maker’s stock following a few days where it suffered big losses due to the market sell-off.
- The stock finished a bullish engulfing chart in Monday’s session, which could form a bear trap.
- Investors should watch major overhead areas on Supermicro's chart around $48 and $63, while also monitoring vital support levels near $26 and $17.
Super Micro Computer shares (SMCI) jumped in early Tuesday trading, adding to a 11% surge yesterday. Investors bid up the server maker’s stock following a few big losses during the broader markets’ tariff-fueled selloff.
Analysts at J.P. Morgan recently stated that the company only needed to increase its prices by 4% based on how much of its hardware would be affected by tariffs.
Supermicro shares fluctuated in price in both directions in the first quarter. The company had to deal with accounting issues which raised fears of a possible delisting from Nasdaq until it met the deadline for filing several delayed financial statements in February. Recent trading saw the stock up 6% to $35.
Below, we analyze the technicals of Supermicro’s chart to identify key price levels that investors might be monitoring.
Bear Traps: Potential Bear Trap
After gapping lower towards the end October, Supermicro shares oscillated inside an orderly ascending trendline until breaking below the pattern’s lowest trendline toward the last month.
However, despite falling to its lowest level since early February last week, the stock completed a bullish engulfing pattern in Monday’s trading session, potentially forming a bear trap—a trading event that lures investors to sell upon a breach of major support before the price makes a sudden move higher.
What’s more is that Monday’s buying coincided when the relative strength indicator (RSI) rose from a level of around 35. This was the same reading the indicator reached at the bottom in early Feburary before the stock doubled in a two-week span.
Supermicro’s chart shows two key areas to monitor for potential follow-through purchases.
Major Overhead Areas of Interest
A decisive close over the lower trendline in the ascending channels could trigger a rally of around $48, This level, just above the 200 day moving average, connects to a range of similar trading activity that stretches back to last August’s notable swing low.
Buying above the price could bring the stock back to the $63 region. Investors who bought shares during the recent decline of the stock may decide to lock-in profits in this area near a trendline linking last year’s peak in late August with the swing high in February.
This location is also in the same area as a projected bar pattern target, which overlays the stock’s sharp upward trend during February with the low of yesterday’s bullish engulfing candles.
Vital Support Levels Worth Monitoring
Supermicro shares may initially retrace towards $26. This is a location in the chart that could attract support near their January trough or early November countertrend high.
A breakdown below the level will lead to a potential fall of $17. Investors might look for buy and hold opportunities near the mid November trough. This is also the 52-week low of the stock.
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