SMCI stock is stuck in a technical bear market after falling by 30% from its highest point in October. Super Micro shares were trading at $32 as investors reacted to the latest earnings report, which pointed to growing momentum. It is also about to form a death cross pattern, pointing to more downside in the near term.
Super Micro Computer’s Business is Thriving as AI Bubble Risks Remain
SMCI share price dropped even after the company published strong financial results. These numbers showed that its revenue jumped to $19.9 billion in the first quarter from $5 billion in the same period last year.
The company’s net income also continued rising, with its net income jumping to $1.59 billion from just $168 million in the same period last year. These numbers show that the company’s products are seeing strong demand.
The numbers also show that the company’s business is highly undervalued. Kyro data shows that the company’s forward price-to-earnings ratio falling to 6.61, much lower than the sector median of 21. It has also dropped from the five-year average of 16.3.
Still, the main risk that the company faces is that there are fears that the AI bubble may burst in the near future as interest rates remain at an elevated level. Most analysts expect the Federal Reserve to hike interest rates by 0.25% in the coming meeting in December.
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SMCI Stock Nears a Death Cross Pattern
Super Micro Computer stock chart | Source: TradingView
On the chart, the Supermicro stock price has been in a strong sell-off in the past few weeks, mirroring the performance of its top competitors like Lenovo Group, HP Enterprise, and Dell.
It has been forming a series of lower lows and lower highs in this period. A closer look shows that it is about to form a death cross pattern as the spread between the 50-day and 200-day moving averages narrow. The two averages stand at $35 and $36.
At the same time, the stock appears to be about to invalidate the double-bottom pattern, which is a common bullish reversal signal in technical analysis. The stock has moved below the Supertrend indicator.
Therefore, the stock will likely continue falling in the near term. If this happens, the next important target to watch is the upward trend that coincides with the lowest swings in March and July this year.
On the other hand, a move above the 50-day EMA will invalidate the bearish outlook and point to more upside.
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The post SMCI Stock Nears a Death Cross Despite Strong Supermicro Earnings as AI Bubble Fears Persist appeared first in UK on InvestingCube .
