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Key Takeaways
- Shares in server maker Super Micro Computer soared 16% Monday after the company reported strong shipments of its GPUs, fueled by AI demand.
- Super Micro Computer shares formed two troughs at similar levels on the chart last month, raising the possibility of a double bottom, a classic chart pattern that signals a potential bullish reversal.
- Investors should watch key overhead price levels on Super Micro’s chart around $48, $70, and $97.50, while monitoring important longer-term support near $35.50.
Shares in server maker Super Micro Computer (SMCI) soared 16% Monday after the company reported strong shipments of its GPUs, fueled by artificial intelligence (AI) demand.
The company, whose stock recently underwent a 10-for-1 stock split, also unveiled a new range of direct liquid cooling products for servers that it said could help AI firms cut their energy costs.
While Super Micro shares have ridden the AI boom to generate a year-to-date return of around 68% through Monday’s close, they have lost more than half their value since setting a record high in March over concerns of deteriorating profit margins amid pricier next-generation AI chips and alleged accounting anomalies.
Below, we take a closer look at the Super Micro Computer chart and use technical analysis to identify important price levels that investors will likely be watching.
Potential Double Bottom
Super Micro Computer shares formed two troughs at similar levels last month, raising the possibility of a double bottom, a classic chart pattern that signals a potential bullish reversal.
Importantly, as the second trough made a slightly lower low, the relative strength index (RSI) formed a comparatively higher low to create a bullish divergence that points to weakening selling momentum.
More recently, today’s jump occurred on the highest trading volume in more than a week, suggesting buying conviction behind the move.
Overhead Chart Levels to Watch
The first higher level to eye sits around $48, a location on the chart just above Monday’s close where the shares may run into resistance near the early August swing low, the late August gap lower’s opening price, and last month’s high.
A decisive breakout above this level could see bulls drive a rally to the $70 region, where the stock finds a confluence of potential resistance from the late February pullback low, troughs in April and May, and the 200-day moving average. This area also lines up with the closely watched 38.2% Fibonacci retracement level when applying the tool from the March high to September low.
Ongoing buying may lead to a retest of the $97.50 area, where investors could look to exit positions near a multi-month trendline connecting a range of peaks on the chart between February and July.
Long-Term Support Level to Monitor
A failure to hold above the September low would invalidate the double bottom setup and could see the shares revisit lower major support around $35.50, where buy-and-hold investors may seek entry points near the August 2023 and January 2024 peaks, both of which marked prior record highs in the stock.
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