Systems Check Complete, Marvell Stock Is Ready for Liftoff
It’s Time for an Accelerated Advance for MRVL Stock
On May 26, Marvell Technology Group Ltd. (NASDAQ:MRVL) stock was up 4.31% on the heels of better-than-expected earning results, in which the company managed to beat on both the top and bottom lines. This surge in price has served to confirm a technical pattern which is now suggesting that Marvell stock is set to continue tacking on gains for the remainder of the year.
I originally highlighted this on January 11, 2017, in a publication titled “Marvell Technology Group Ltd.: The Sky’s the Limit if MRVL Stock Does This.” That publication outlined the fact that a very powerful price pattern was in development, and that—upon completion—it would open the door to much higher stock prices.
This price chart illustrates a completed symmetrical triangle. These technical price patterns are some of my favorites, because triangle price patterns are particularly powerful when they are finally resolved.
The following Marvell stock chart illustrates the very large completed technical price pattern.
Chart courtesy of StockCharts.com
The reason why these patterns are particularly powerful is that, while the pattern is in development, there is momentum being stored within the pattern. This momentum is a result of bullish and bearish investors fighting for dominance. The battle between these two camps causes lower highs and higher lows to develop.
Connecting these respective highs and lows using simple trend lines captures levels of support and resistance. A victor in the battle between the bulls and bears is decided when the stock price breaks above resistance or below support. The size and duration of the pattern that is in development is directly related to the magnitude to the reaction that is set to occur when the pattern is finally resolved.
In January 2017, MRVL stock exited the symmetrical triangle by breaking above the trend line that outlines resistance. This feat completed a technical price pattern that has been in development since 2009, and it is suggesting that Marvell stock is set to appreciate. At first glance, this price pattern is suggesting that the high set at $21.00 in 2010 is the first stop for this potential rocketship of an investment.
The break above resistance that competed the pattern was of very little surprise, because the moving average convergence/divergence (MACD) indicator in the lower panel of the above chart was suggesting that such an outcome was a real possibility.
MACD is a trend-following momentum indicator that distinguishes between bullish and bearish momentum, using the crossing of a signal line. In June 2016, a bullish MACD cross occurred, which served to suggest that bullish momentum was influencing the predominant direction that MRVL shares were trading in. A bullish MACD cross creates an environment where the path of least resistance is towards higher stock prices, and it is why the completion of the symmetrical triangle should come as no surprise.
The following price chart illustrates the bullish price action that is currently supporting the current advance in Marvell stock.
Chart courtesy of StockCharts.com
The price chart illustrates that the advance off the lows set in 2016 has been dominated by an alternating two-wave structure consisting of impulse waves and consolidation waves. This alternation wave structure is what I refer to as constructive price action. For a bullish trend to remain sustainable, this wave structure should be present.
The initial wave is an impulse wave, and it serves to progress the advancement of the stock price. The consolidation wave that follows serves to alleviate any overbought conditions that were created during the advancement of the price, and—more importantly—sets up the next advancing impulse waves.
Each and every time the price has exited a consolidation wave, an impulse wave has followed. This alternating wave structure has created the quintessential characteristic of a bullish trend which contains higher highs and higher lows. This creates a stair-step pattern which outlines the advancement in the stock price.
In January of this year, Marvell stock exited the the large symmetrical triangle, and a brief pop of a consolidation wave quickly developed. While this consolidation wave was in development, MRVL stock returned to test the triangle pattern from above.
This is known as a “backtest,” and it is not uncommon for a stock to return to test a previous level of resistance from above. This action serves to reaffirm that the break above resistance was legitimate, and serves to establish this previous level of price resistance as a new level of price support.
After the successful backtest, MRVL stock went on to complete another consolidation wave, and a new impulse wave is now in development. This would mark the first impulse wave to develop outside the symmetrical triangle. If the bullish view suggested by the symmetrical triangle is set to develop, it is going to happen now, which makes it a really exciting time to be a Marvell investor.
Bottom Line on Marvell Stock
Marvell stock completed a very large technical price pattern in January of this year, and has spent much of that time backtesting that price pattern from above. MRVL stock has just broken above the initial peak that was created when this pattern was completed, and the bullish implications set out by this pattern are now set to play out.