Super Micro Computer
Shares of Super Micro Computer (SMCI) rallied more than 7% today as the stock made a “technical flex.” Volume was a little higher than average on the high-performance server solutions company as intermediate-term investors took advantage of the stock’s recent technical support.
Super Micro’s shares have been consolidating in a range since the company’s earnings announcement in April. Shares dropped to $700 immediately after the earnings drop and have been trading between that price and $1,000 since.
The consolidation has resulted in Super Micro’s 20-day moving average converging with the longer 50-day moving average. Here’s where it gets interesting.
The shorter-term 20-day moving average, what I refer to as the “Trader’s Trendline,” is slowly turning higher, indicating that momentum is starting to shift the stock slightly bullish. The 50-day moving average is firmly in neutral territory, but that may change soon.
Another 6% move higher for Super Micro’s stock will result in it breaking above its top Bollinger Band. Any type of bullish tailwind from the market will accelerate buying interest in SMCI shares, resulting in another attempt for the stock to break above $1,000.
For now, the stock remains neutral, but understand that the upside potential for Super Micro stock outweighs the downside risks at this point. I still maintain a bullish outlook on the stock with a $1,500 price target.
Salesforce
The AI service stocks are seeing increased attention this week as some investors are diversifying their AI portfolios by selling NVIDIA stock.
Shares of Salesforce (CRM) notched higher today by 4% as the stock is now trying to break a key technical trendline after one of the company’s board members bought about $500,000 of the stock this week.
Salesforce stock ripped through its 200-day after issuing a disappointing outlook during its last earnings conference call. Since then, the stock has been crawling its way back towards that critical trendline.
After a 20% rally, shares tried crossing above the 200-day moving average today but were denied. Currently, that trendline sits at $257, but there’s another hurdle the stock has to overcome just above that price to continue its bullish trend.
Salesforce stock’s 50-day moving average – currently in a bear trend – is just above the 200-day at $260. A break above that $260 level will grab the attention of investors waiting to see if Salesforce shares would survive the company’s lowered outlook. History suggests that we will see a dramatic increase in buying if that happens as investors prepare for the stock to make a run at its all-time highs.
Keep in mind, Salesforce’s management suggested that only this quarter would be lighter on revenue and earnings as the company reaffirmed their 2024 guidance during the last earnings call. Target a return to $280 ahead of the company’s next earnings report on August 21.
Palantir
It was a day for AI service companies to shine. Shares of Palantir (PLTR) broke back above the $25 price today, a feat that the stock was unable to maintain more than one day in May. But there’s a big difference between those situations.
In May, the stock attempted to break above $25 while its 20- and 50-day moving averages were both in bearish trends. The attempt was ahead of the company’s earnings report on May 6 when management guided their earnings and revenue projections higher for this quarter and fiscal year 2024. Shares poked above $25 for one day only to drop 18% over the next week.
Last week, the stock tried to break through $25 but was thwarted as a small boutique firm downgraded Palantir shares to a sell. Today, the stock is back above $25 and has the support of the same 20- and 50-day moving averages, which are both in bullish trends.
Watch for Palantir shares to post a “buy the rumor” rally ahead of their August 5 earnings call that may take shares to $30, a 20% rally from today’s close.
About the Author
Chris Johnson (“CJ”), a seasoned equity and options analyst with nearly 30 years of experience, is celebrated for his quantitative expertise in quantifying investors’ sentiment to navigate Wall Street with a deeply rooted technical and contrarian trading style.