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Super Micro Computer plunged 13 per cent in after-hours trading on Tuesday after the server maker reported earnings that missed estimates, dropped its profit forecast in a light manner, and revealed a surprise year-over-year decline in adjusted gross margin as the growing expense of transitioning to more expensive AI chips weighed on the bottom line.
The shares broke below a descending triangle in July, but the price closed beneath the closely watched 200-day moving average in early August.
Charts of Super Micro Computer shares show areas of resistance at $496, $357 and $260.
Super Micro Computer (SMCI) closed more than 13% lower in after-hours trading on Tuesday following the release of quarterly earnings that disappointed, a light forward-looking profit forecast and a surprise sequential decline in adjusted gross margin as the higher cost of a shift to pricier artificial intelligence chips weighed on the bottom line. The company also declared a 10-for-1 stock split beginning 1 October.
Shares soared through the years as investors wagered servers at the site would be powered by the graphics processing units (GPUs) of Nvidia (NVDA), whose chips have been in blistering demand as AI modelling and apps proliferate. Lately, however, the stock trades 48 per cent below its March record close as analysts voiced concern over order uncertainty from demand fluctuations due to its server maker’s migration to its pricier next-generation Blackwell AI chips.
Here, we examine Super Micro’s chart more closely, and use technical analysis to determine those price levels where informed investors will likely be placing stops following what is almost certainly going to be an earnings-driven price drop.
Breakdown From Descending Triangle
Shares of Super Micro last hit a new peak in early March, before spending about four months trading in a descending triangle on the chart, before finally breaking down from the bearish chart pattern in late May. Since then, the move lower has accelerated into early August, as shares have pushed below the long-term 200-day moving average (MA) and broken down from a doji at the more closely watched 81 level and drawn in a fresh area of support to watch. That’s also where shares were quoted ahead of the company’s latest quarterly results.
Significantly, Tuesday saw the stock’s largest day of trading volume since late June, hinting at repositioning by larger market players to mitigate the volatility risk arising post-earnings.
Monitor These Levels Amid Earnings-Driven Selling
If an expected earnings-based swoon in Super Micro shares is to find support, three key levels on the chart will be important to watch.
The first is $496, an area where the stock could experience some buying interest near the close on Jan. 29, filling a gap in the first part of the impulsive higher price move between late January and mid-February.
A failure to hold this level could lead to a retracement back to around $357 – an area where the share could find support around a horizontal line joining the August 2023 and January 2024 swing tops.
Ultimately, a bigger reversal might result in a retest of the $260 area, now around 58 per cent lower than Tuesday’s closing level, underneath which a trendline joining the June 2023 swing high with a cluster of similar trading levels on the chart between August and December of last year would likely offer some support.
Super Micro stock fell 13% to $535.00 in after-hours trading Tuesday.
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