Is Super Micro Computer Stock Really Super?
Here's what to avoid for now.
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Back on March 11 and March 19 I wrote about Super Micro Computer SMCI and wrote that "Prices may hold around the round number of $800 but I cannot rule out further declines. Keep your powder dry."
Prices were tumbling hard this Wednesday after the company reported Tuesday evening a Non-GAAP EPS of $6.65 which beat estimates by $1.08 and revenue of $3.85B which missed by $50M.
So let's check out the charts again.
In this daily bar chart of SMCI, below, I can see that prices have plunged below the now declining 50-day moving average line. The slower-to-react 200-day moving average line is still rising and intersects down below $500.
The On-Balance-Volume (OBV) line peaked back in February and its weakness tells me that sellers of SMCI are being more aggressive than buyers. The trading volume also shows us a peak in late February.
The Moving Average Convergence Divergence (MACD) oscillator is below the zero line and trying to generate a cover shorts buy signal.
In this weekly Japanese candlestick chart of SMCI, below, I can see a number of upper shadows on several weekly candles. This tells me that traders are rejecting the highs of the week and the path of least resistance is lower. The slope of the 40-week moving average line is still bullish but this is a lagging indicator.
The weekly OBV line has turned lower and the MACD oscillator has crossed to the downside for a take profits sell signal.
In this daily Point and Figure chart of SMCI, below, I can see an upside price target in the $1,069 area. Today's weakness (not plotted yet) could turn the price target to the downside.
View larger here.
In this weekly Point and Figure chart of SMCI, below, I can see that the software is projecting a potential downside price target in the $481 area.
View larger here.
Bottom line strategy: The broad market averages are in a "risk off" mode and I suspect that will impact stocks like SMCI. Avoid the long side of SMCI as further declines are likely.
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