Watch These Supermicro Price Levels as Stock Soars

Super Micro Computer (SMCI) shares are likely to remain on investors’ radar screens after moving sharply higher Wednesday for a second consecutive day, as the embattled server maker announced that it’s ramping full production availability of its latest artificial intelligence (AI) data center server solution.

The news comes after the company said on Monday that it would provide a second-quarter business update next Tuesday. Investors are eager to hear if the company remains on track to meet a Feb. 25 deadline given by the Nasdaq for submitting several delayed regulatory filings that are required to meet exchange listing requirements.

Supermicro shares have recovered nearly 40% over the past three months but have still lost around half their value over the last year. The stock slid last year amid concerns about the company’s accounting practices and corporate governance after short seller Hindenburg Research accused the company of accounting manipulation.

The stock gained 8% on Wednesday to close at $31.49, after rising 8.6% the day before.

Below, we take a closer look at Supermicro’s chart and use technical analysis to identify crucial price levels worth watching out for.

Descending Broadening Wedge Breakout Watch

Supermicro shares have oscillated within a descending broadening wedge since mid-July last year, with the price tagging the pattern’s upper and lower trendlines on several occasions since that time.

More recently, the stock has traded towards the top of the formation, raising the possibility of a breakout attempt.

In another win for the bulls, Wednesday’s jump occurred on the highest volume since early December, indicating buying conviction by larger market participants, such as institutional investors. It’s also worth pointing out that the relative strength index (RSI) climbed back above the 50 threshold, confirming improving price momentum.

Let’s identify three crucial overhead areas where Supermicro shares may face resistance and also locate important support levels to monitor if the price turns lower.

Crucial Overhead Areas to Eye

The first overhead area to eye sits around $34.50. The shares find a confluence of resistance in this area near the descending broadening formation’s upper trendline and the popular 50-day moving average.

Buying above this level could propel a move to the psychological $50 area. Investors may look for exit points in this region near the early August trough, which closely aligns with the upper level of narrow consolidation range on the chart throughout most of October.

An accelerating uptrend may see the shares rally to around $70. This location on the chart may provide resistance near a trendline that connects last year’s February and April troughs.

Important Support Levels to Monitor

Upon a downturn in the share price, investors should initially monitor the $26 level, an area where the stock could encounter support near last month’s swing low.

Finally, a decisive close below this level opens the door for a larger drop to around $18. Bargain hunters who deploy buy-and-hold strategies could look to accumulate shares near the prominent November 2024 trough.

The comments, opinions, and analyses expressed on Investopedia are for informational purposes only. Read our warranty and liability disclaimer for more info.

As of the date this article was written, the author does not own any of the above securities.