Marvell Technology Group (MRVL) - Get Report is a semiconductor company that's trading below its 50-day simple moving average at $24.95 and has a negative weekly chart. This is a tough backdrop when the company reports quarterly earnings after the closing bell on Thurs., Aug. 29. My call is to reduce holdings pre-earnings as the stock is not cheap with a P/E ratio of 35.22 and a puny dividend yield of 1.02%, according to Macrotrends. Over the past three months analysts have offered 20 downward revisions to EPS estimates and 18 downward revisions to revenue. With reduced positions you can react to earnings volatility by buying weakness to its semiannual value level at $21.39 or selling strength to its monthly risky level at $27.95.
The stock closed Wednesday at $23.58 up 45.8% year to date and in bull market territory up 64.4% above its Dec. 26 low of $14.34. The stock is also in correction territory 14.7% below its 2019 high of $27.64 on July 27. Longer term, the stock was a momentum high-flyer as its all-time intraday high of $36.83 was set in January 2006. Marvell Tech is thus consolidating its Great Recession crash of 87% to its November 2008 low of $4.48.
Analysts expect Marvell to earn 5 cents to 15 cents per share when they report after the closing bell on Aug. 29. The company has mixed results over the last four quarters. Wall Street is forecasting growth in its networking business. On the opposite side of the ledger there will likely be a decline in demand for its wireless base station customers as they are in transition from 4G to 5G. Guidance could be cautious given the delay in tariffs talks with China. This questions the overall demand for semiconductors.
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The Daily Chart for Marvel Technologies
Courtesy of Refinitiv XENITH
The daily chart for Marvel shows that the stock is below its quarterly pivot at $24.58 and below its 50-day simple moving average at $24.95. On a positive reaction to earnings, the stock could pop toward its monthly risky level at $27.95. On a negative reaction to earnings, the downside risk is to its semiannual value level at $21.39 and its 200-day simple moving average at $21.03.
The Weekly Chart for Marvel Technologies
Courtesy of Refinitiv XENITH
The weekly chart for Marvel Technologies is negative with the stock below its five-week modified moving average of $24.60. The stock is well above its 200-week simple moving average or "reversion to the mean" at $16.92, last tested during the week of Dec. 28 when the average was $15.27, which was a buying opportunity. The 12x3x3 weekly slow stochastic reading is projected to decline to 53.65 this week down from 62.00 on Aug. 23.
Trading Strategy: Buy weakness to the semiannual value level at $21.39 and reduce holdings on strength to the monthly risky level at $27.95.
How to use my value levels and risky levels:
Value levels and risky levels are based upon the last nine weekly, monthly, quarterly, semiannual and annual closes. The first set of levels was based upon the closes on Dec. 31. The original annual level remains in play. The weekly level changes each week. The monthly level was changed at the end of each month, the latest on July 31. The quarterly level was changed at the end of June. My theory is that nine years of volatility between closes are enough to assume that all possible bullish or bearish events for the stock are factored in. To capture share price volatility investors should buy on weakness to a value level and reduce holdings on strength to a risky level. A pivot is a value level or risky level that was violated within its time horizon. Pivots act as magnets that have a high probability of being tested again before its time horizon expires.
Disclosure: The author has no positions in any stocks mentioned and no plans to initiate any positions within the next 72 hours.