Let’s take a look at something marvelous. Here’s Marvell Technology (MRVL)…coming out of a squeeze. (January 04, 2018)
MRVL SMH MRVL
Marvell Technologies ( NASDAQ: MRVL ). I have covered this the last few days, not here but in the Strategy Session. I want to mention something here, this is a weekly chart of this semiconductor company. If you look at this chart, this really is pretty nice consolidation. You could say it is a flag pattern, I don’t really look at weekly charts as forming flag patterns but hey, who knows, you might. This is consolidation here.
Now, if we look at the daily chart we can see a really, really tight squeeze that has now broken out here. The issues that I have with this are actually kind of a combination fundamental, technical. From a technical point the relative strength on this is pretty good. If we look at this compared to the QQQs ( NASDAQ: QQQ ) it is just tracking sideways, it is just trading sideways. It is not really stronger, it is not weaker than the Qs ( NASDAQ: QQQ ) it is just trading sideways.
From an earnings per share rating, and I just use IBD stuff, it has a 79 percent and that is not good for me. I want stuff that is at least 80, frankly, in the 90s much better. So I am looking for much better earnings than this. If I just look at the earnings growth rate over the last 3-5 years it is actually negative. This isn’t really my deal normally. However, we are seeing institutional buying here; this is pretty strong buying here, all the way through this. Now the stock is moving up and volume is increasing, volume is increasing. This is a stock that I think actually works.
Now, if you look at the Semiconductors ( NYSEARCA: SMH ) you can see the ETF is in the same situation; where it is broken down, squeeze, and just starting to come out of a squeeze. So with Marvell ( NASDAQ: MRVL ), it is trading in sync with the SOXX ( NASDAQ: SOXX ). I think you can buy it here. Know that you are buying on the fourth day and that can be problematic. Technically the stock could pull down 9 percent even 10 percent before you would really have to second guess yourself.
However, you can do it a different way by just looking at things this way: You say. “You know what? This was the breakout here. If the stock comes down into this part of the red box. If it comes down through the breakout and like halfway down, then that is when I want to get out.” That means that you would put your stop maybe a little bit above 22.00, which means that now you have got a stop that is reasonable, 6, 6.5 percent.
That is how I would trade Marvell ( NASDAQ: MRVL ). I like these squeezes, they just tend to work. The company doesn’t report earnings for almost two months so I think you are good to go here.
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