Watch Out for These Levels in Super Micro Computer's Stock Price

Super Micro Computer (SMCI) remains in focus on Friday after shares in the artificial intelligence (AI) server maker surged more than 12% yesterday, adding to their three-fold year-to-date gain, as the company benefits from broad optimism about AI-fueled demand. 

Oracle (ORCL) on Tuesday announced several large AI cloud deals, while chipmaker Broadcom (AVGO) said Wednesday that its AI product revenue reached a record high. Those are both encouraging developments for Super Micro, which provides specifically designed rack servers and other hardware to power the technology’s growing infrastructure requirements.

Let’s take a look at the company’s chart and apply several technical analysis principles to identify key price levels worth watching.

Symmetrical Triangle Forms on Super Micro Chart

Super Micro Computer shares have traded within a symmetrical triangle since reaching their all-time high (ATH) in early March, with the pattern’s top trendline and 50-day moving average providing significant resistance over the past month.

Although a symmetrical triangle represents a pause in price, a decisive breakout from the pattern often marks the start of a new trend or a continuation of the longer-term trend, especially if the move occurs of above-average trading volume.

Given the stock’s jump on Thursday on the highest share turnover since early May, investors should monitor for a potential imminent breakout above the pattern.

Post Breakout Price Levels to Watch 

If an upside breakout occurs, investors can project a price target using a measured move, a useful technique when a stock trades near its record high where there's limited prior price action to reference. 

To do this, we calculate the distance between the initial high and low of the symmetrical triangle in points and add that amount to the pattern’s top trendline. In this case, we add $642 to $870, which forecasts a price target of $1,512. This provides an possible area where the stock may encounter resistance, especially if other technical indicators are flashing overbought readings.

Investors should also have levels in mind to watch if the stock breaks down from the pattern. Two key possible support areas to monitor include the 200-day moving average, currently at $566.75, and a horizontal line connecting several price peaks between August and January around $350.

Super Micro shares were down 2.8% at $847.00 in premarket trading Friday about 90 minutes before the opening bell.

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