Shares Fell 13% in Extended Trading Tuesday

Source: TradingView.com
Source: TradingView.com

Key Takeaways

  • Super Micro Computer shares slumped 13% in extended trading on Tuesday after the server maker reported earnings that fell short of expectations, issued a light profit forecast and disclosed a surprise drop in adjusted gross margin, as the cost of transitioning to more expensive AI chips weighed on the bottom line.
  • The shares broke down below a descending triangle last month, with the price closing beneath the closely watched 200-day moving average in early August.
  • Super Micro Computer shares may find support at key chart levels including $496, $357, and $260.

Super Micro Computer (SMCI) shares slumped more than 13% in extended trading on Tuesday after the server company reported quarterly earnings that fell short of expectations, issued a light profit forecast and disclosed a surprise drop in adjusted gross margin, as the cost of transitioning to more expensive artificial intelligence chips weighed on the bottom line. The company also announced a 10-for-1 stock split that takes effect from Oct. 1.

Investors have bid up company’s shares in recent years, betting its servers will house Nvidia’s (NVDA) graphics processing unit’s (GPU’s), which have seen insatiable demand amid the widespread adoption of AI models and applications. However, more recently, the stock trades around 48% below its record close set in March as analysts express concerns over order uncertainty caused by the server maker’s move to Nvidia’s pricier next-generation Blackwell AI chips.

Below, we take a closer look at Super Micro’s chart, while using technical analysis to identify important price levels that investors will likely be watching following the stock’s projected earnings-driven drop.

Breakdown From Descending Triangle

Since setting a record high in early March, Super Micro shares oscillated within a descending triangle for four months before breaking down from the bearish chart pattern last month. The move lower has continued into early August, with the price falling below the closely watched 200-day moving average (MA) and forming a doji ahead of the company’s quarterly results, a candlestick pattern that conveys indecision among buyers and sellers.

Importantly, the stock on Tuesday recorded it largest day of trading volume since late June, indicating repositioning by larger market players to manage post-earnings volatility risk.

Monitor These Levels Amid Earnings-Driven Selling

Amid an expected earnings-driven fall in Super Micro shares, investors should monitor three key locations on the chart that could provide support.

The first sits $496, an area where the stock may attract buying interest around the Jan. 29 close, which would fill a gap in the early portion of the price’s impulsive move higher between late January and mid-February.

An inability to hold this level could see a decline to around $357, an area where the shares may find support near a horizontal line connecting the August 2023 and January 2024 swing highs.

Finally, a more significant correction may lead to a retest of the $260 region, currently around 58% below Tuesday’s close, where the price would likely find support from a trendline linking the June 2023 swing high with a range of comparable trading levels on the chart between August and December last year.

Super Micro stock fell 13% to $535.00 in after-hours trading Tuesday.

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