Watch these supermicrocomputer price levels as stocks fall after earnings announcement

Shares of Super Micro Computer (SMCI) fell more than 13% in extended trading Tuesday after the server company reported quarterly earnings that fell short of expectations, issued an earnings forecast and disclosed a surprise decline in adjusted gross margin as the cost of switching to more expensive artificial intelligence chips weighed on net income. The company also announced a 10-for-1 stock split that will take effect Oct. 1.

Investors have been bidding up the company’s stock in recent years on bets that its servers would house Nvidia’s (NVDA) graphics processing units (GPUs), which have seen insatiable demand amid widespread adoption of AI models and applications. But the stock has recently traded about 48% below its March record close as analysts raise concerns about order uncertainty caused by the server maker’s switch to Nvidia’s more expensive next-generation Blackwell AI chips.

Below, we’ll take a closer look at Super Micro’s chart and use technical analysis to identify important price levels that investors will likely be paying attention to following the stock’s projected earnings-led decline.

Decay from a descending triangle

Since setting a record in early March, Super Micro shares hovered in a descending triangle for four months before breaking out of a bearish chart pattern last month. The downtrend 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 posted its highest daily trading volume since late June, indicating that larger market players are repositioning to manage volatility risk following earnings announcements.

Monitor these levels in light of profit-driven sales

With Super Micro stock expected to decline on earnings, investors should watch three key chart areas that could provide support.

The first price is $496, which could attract buying interest around the close of trading on January 29, which would fill the gap in the initial impulsive price rally between late January and mid-February.

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

Finally, a more significant pullback could see a retest of the $260 level, which currently sits about 58% below Tuesday’s close, where the price would likely find support in the form of a trendline connecting the June 2023 swing high with the range of comparable trading levels on the chart between August and December of last year.

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

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As of the date of this writing, the author does not own any of the above securities.