Five Below Looks Poised for a Breakout
If the retailer can close above this level, we should see a test even higher.
You've reached your free article limit
You've read 0 of 1 free Pro articles.
October’s end gave tech investors a bit of a fright. The onslaught of earnings from the Magnificent 7 will be in the rearview mirror as we kick off November. Overall, the group's results were solid — nothing troublesome but nothing spectacular. Expectations ran high, given the strong moves in the group into the multiple earnings announcements this week.
The Mag 7 ETF matched its July all-time high, so a little pullback is expected, but if the group falls another 2%, the technical picture might become scary.
Nothing scared investors more than Super Micro Computer SMCI this past week after its auditors publicly fired them using a severely negative tone in its resignation letter regarding the company’s financials.
Once the best-performing stock in the large-cap universe, SMCI sits about 75 cents away from round-tripping a 400% move higher. I can’t remember seeing that happen to a company of this size since the days of dot-com.
While I viewed SMCI as a stock of the year candidate at the start of the year, I moved into profit-taking advocate mode in late Q1 and noted the technicals turned bearish in early April. Now, with the resignation of the company’s auditors in such a negative public fashion, the stock is radioactive.
While five of the Mag 7 reported this past week, I’m watching a different five into next week: Five Below FIVE. After a strong move higher in August and September, FIVE hit resistance after it filled its bearish gap from July. Shares have been trading in a $10-wide channel for the month of October.
Slowly, the 10-day and 21-day exponential moving averages (EMAs) have converged with the 10-day crossing above the 21-day EMA yesterday for the first time since late August. If FIVE can close above $96, we should see a test of $102. A break above $102 could carry us to $110. Support sits at $92 and $87, so traders will want to confirm the breakout. That way, they can use $96 or $92 a stop level rather than $87, as that is too much risk for the potential reward.
At the time of publication, Byrne had no positions in any securities mentioned.
