SMCI’s latest stock rally: Key considerations for traders. (12/04/2024)

Hello, everyone! This week, we’re focusing on Super Micro Computer Inc. $超微电脑 (SMCI.US)$ , once a standout in the AI space. Recently, the company faced controversy over accounting fraud allegations by a short-selling firm, which caused its stock to drop significantly. However, a favorable verdict has since vindicated SMCI, leading to a strong stock recovery. In this article, we’ll look at the latest trends and recent market activity for the company.

What’s new?

On Monday, December 2, 2024, SMCI’s shares surged by approximately 29% after a special committee reaffirmed its finding of “no evidence of misconduct” at the embattled AI server maker, and appointed a new chief accounting officer.

SMCI’s stock experienced extreme volatility, plummeting 86% from its March peak before doubling from last month’s low. To understand this turbulent journey, let’s examine the key factors behind the initial plunge:

● Short-seller firm Hindenburg Research accuses SMCI of accounting manipulation and other issues in late August.

● SMCI delays filing 10-K annual report for fiscal 2024.

● Nasdaq issues noncompliance letter to SMCI.

● SMCI’s auditor resigned in late October after raising concerns.

● An independent special committee found “no evidence of fraud or misconduct” on Nov. 5.

● SMCI filed Nasdaq a compliance plan and named a new auditor on Nov. 18.

● The special committee confirmed preliminary findings and no financial restatement expected on Dec. 2.

Investor relief appears to have drawn buyers back to the heavily shorted stock. While SMCI is confident in maintaining its Nasdaq listing, it still faces the risk of delisting due to the delayed financial report filings.

Chart of the day

Trend analysis:

Since peaking at $122.90 in March, SMCI’s stock has experienced a dramatic decline, characterized by three periods of downward movements, as illustrated in the daily chart. After bottoming out at $17.25 in mid-November, the stock price has surged, doubling within two weeks amid significant volatility.

Technical indicators:

● SMCI is currently trading above its 50-day moving average (MA), which might suggest short-term bullish momentum. However, it remains significantly below the 200-day MA, indicating that the longer-term trend might remain bearish.

● The trading volume demonstrated notable market activity, with the turnover ratio exceeding 100% in the last three trading sessions. This elevated level of trading suggests a highly speculative and volatile market environment, potentially indicating heightened investor interest or uncertainty.

● The MACD indicator has recently crossed above its signal line and the zero line. This movement often suggests a potential shift in momentum from bearish to bullish.

● The KDJ indicator is currently showing elevated readings. The K line has moved above the 80 level and has hovered around this level for multiple trading sessions. While this could potentially indicate an overbought condition in the short term, it’s important to note that assets can remain in overbought or oversold territories for extended periods, especially in strong trends.

● Historical price action suggests a notable price level around $50, which coincides with a previous high observed in mid-October. This area may be worth monitoring as it could potentially act as a resistance level.

In summary, while SMCI’s stock price has shown significant appreciation from its 52-week low recorded several weeks ago, demonstrating notable upward momentum in the short term. However, it’s important to consider that short-term price movements don’t necessarily indicate a change in longer-term trends. Market participants may consider monitoring potential support around the 50-day moving average, as some traders view this indicator as an area of interest for short-term price dynamics.

This presentation discusses technical analysis, other approaches, including fundamental analysis, may offer very different views. The examples provided are for illustrative purposes only and are not intended to be reflective of the results you can expect to achieve.

All investment involves risk, including the potential loss of principal, and there can be no guarantee that any investment strategy will be successful.