MRVL Stock: Moment of Truth
Marvell Technology Group Ltd. (NASDAQ:MRVL) just reported an exceptional fiscal third-quarter earnings report, where it beat on both the top and bottom lines, and guided higher for the next quarter. It even threw in a $1.0-billion share repurchase program as an added bonus to an already exceptional earnings report.
As a result MRVL stock was up 8.53% in after-hours trading.
If all this was not enough, Marvell stock has the potential to complete a large technical pattern that could add another 40% in potential gains to the projected opening price, based on after-hours trading.
I am enamored with technical patterns. The bigger the pattern, the more excited I get when I see it. Large patterns that span longer time frames outperform their smaller counterparts.
The following Marvell stock chart illustrates the large technical pattern that is currently in play.
Chart courtesy of StockCharts.com
Shortly after the financial crisis of 2009, MRVL stock began to put in a symmetrical triangle. A symmetrical triangle is a consolidation pattern that contains two converging trend lines. One line represents resistance and the other represents support. The price pattern that develops is caused by the price action.
Every subsequent rally in MRVL stock ended at a lower high, as sellers were more willing to exit positions at lower prices. Each subsequent sell-off in MRVL stock ended at a higher price as buyers were more willing to step in.
These pattern are notorious for their powerful breakouts. Triangles are patterns in which momentum is being built as the pattern progresses. Longer and larger patterns build more momentum and, as a result, a larger reaction is expected when the pattern is completed.
Marvell stock was expected to open the trading day testing the trend line that represents resistance. How MRVL stock reacts will determine where the price of this investment goes next.
If Marvell stock can close above this trend line, the initial price objective would be the highest point from which the triangle began to develop, and that price point sits at $21.00. This would represent a 57% return from Thursday’s closing price. Factor in the after-hours gain, and the return stands at a potential 44%.
The lower panel labeled “MACD” supports a possible bullish breakout. Moving average convergence/divergence (MACD) is a simple and effective trend-following momentum indicator. Signal-line crossings are used to distinguish between bullish and bearish signals. This indicator became bullish in July. It indicated that the bearish momentum has now waned and that the bulls are now in control.
The following Marvell stock chart illustrates the bullish price action that has led to a possible bullish breakout.
Chart courtesy of StockCharts.com
The MRVL stock chart above is a perfect example of healthy bullish price action. Healthy price action consists of impulse waves that take a stock price higher, and consolidation waves are where the new higher prices are digested. Consolidation waves are essential in a healthy trend because they alleviate any overbought conditions that may have developed as the stock moved higher.
On the Marvell stock chart above, the impulse waves are highlighted in green, and the consolidation waves are highlighted in purple. Based on after-hours market action, MRVL stock was set to open higher, completing the consolidation wave and setting the stage for a new impulse wave to develop. Such price action increases the odds that the symmetrical triangle will be completed in the form of a breakout.
In April, MRVL stock generated a golden cross. A golden cross is a bullish signal that is produced when a 50-day moving average (highlighted in blue) crosses above a 200-day moving average (highlighted in red). This signal indicates that bullish tailwinds are prevailing and that the path of least resistance is higher.
Bottom Line on Marvell Technology Group
Marvell Technologies Group had a stellar earnings report, which has set the stage for a possible bullish breakout of a symmetrical triangle. Marvell stock is set to open the day higher, and a successful breakout will set the stage for higher prices in MRVL stock.