MRVL Stock: On the Cusp
Marvell Technology Group Ltd. (NASDAQ:MRVL) stock is bumping up against an extremely important level of resistance and even the slightest advance would cause MRVL stock to break above this level. This level of resistance is not any ordinary level of resistance.
This resistance marks a very large technical pattern that has been eight years in the making, and a break above it would be a monumental occasion. As a result, I have been watching MRVL stock with a keen eye, anticipating a resolution to this pattern.
Not all price patterns are created equal, but the characteristic they do share is that, the longer it takes for a pattern to develop, the larger the reaction that follows. Eight years is a long time to create a pattern, and the level of resistance outlined by this pattern is all that is standing in the way of much higher Marvell stock prices.
The following Marvell stock chart illustrates the large technical pattern that has developed over the past eight years.
Chart courtesy of StockCharts.com
The MRVL stock chart above illustrates a large symmetrical triangle that has been in development for the last eight years. A symmetrical triangle contains two converging trend lines; one line represents resistance and the other represents support.
The converging trend lines are a direct result of sellers willing to exit positions at lower prices after a rally, and buyers willing to acquire shares at higher prices after a sell-off.
Triangles are notorious for their powerful breakouts, and the size of this pattern translates into an equally large breakout. All Marvell stock needs to do is close above resistance and a powerful move is expected to follow.
The lower panel labeled “MACD” supports a 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 momentum swings.
MACD became bullish in July, and helped fuel the advance towards resistance. This indicator is still bullish, so perhaps the bulls can still muster enough energy to break out above resistance.
The following Marvell stock chart illustrates the price action that has developed within the pattern.
Chart courtesy of StockCharts.com
The advance in price that took MRVL stock to test resistance can be only described as healthy price action. Healthy price action consists of impulse waves that advance the price of the stock, and consolidation waves that alleviate any overbought conditions and set up the next impulse wave.
The impulse waves on the Marvell stock chart above are highlighted in green, and the consolidation waves are highlighted in purple. The waves continue to alternate and the progression in price is orderly, which means that the trend is sustainable.
A consolidation wave is now developing right under the aforementioned resistance level. The resolution of the consolidation wave will dictate whether the symmetrical triangle will be broken to the upside or not.
Perhaps Marvell stock will need more of a running start to break above the trend line, so if the price does break down, I will be watching the moving averages. These moving averages have been in bullish alignment since April 2016, when a golden cross was generated.
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). Traders use this signal to confirm that a bull market is in play and, as long as the moving averages remain in bullish alignment, I will continue to believe that MRVL stock can push for a bullish breakout.
Bottom Line on MRVL Stock
I am sitting on the sidelines awaiting an outcome of a price pattern that can potentially send MRVL stock soaring to new heights. My view on Marvell stock is so contingent on a resolution of this pattern that I have no choice but to hold a neutral bias until a resolution finally presents itself.