Watch These Microchip Technology Levels Amid Big Swings in Stock Price
Key Takeaways
Microchip Technology (
MCHP
) shares could remain on watchlists after tumbling Thursday to lead chip stocks lower during a broad post-rally
sell-off for U.S. equities
.
Chip stocks such as Microchip, which makes silicon used in everything from consumer electronics to automotive systems, have remained particularly volatile against a backdrop of
tariff uncertainty
that has weighed heavily on
consumer and business confidence
, both key customers that drive chipmakers’ earnings.
Microchip shares gave back about half of the previous session’s record gains on Thursday, falling 14% to $38.81. Since the start of the year, the stock has lost around a third of its value, compared to the
Nasdaq Composite’s
15% drop over the same period.
Below, we analyze the
technicals
on Microchip’s
weekly chart
and identify important price levels that investors may be watching out for.
Price Swings Continue
Selling in Microchip shares has accelerated after the 50-week moving average (MA) crossed below the 200-week MA in early March to form a
death cross
, a chart pattern that signals lower prices.
More recently, the stock’s
volatility
has increased significantly since last week’s tariff-induced 25% sell-off, with
sizeable swings
in both directions. Importantly, this week’s price gyrations have occurred on the highest
trading volume
since February 2017 as investors take bets on the chipmaker’s next move.
Meanwhile, the
relative strength index
confirms bearish price momentum, though the indicator remains in oversold territory, potentially attracting
short covering
and
buy-a-bounce
investors.
Let’s apply t
echnical analysis
to identify important
support and resistance
levels on Microchip’s chart.
Important Support Levels to Watch
The first lower level to watch sits around $34. This area on the chart would likely attract significant attention near this week’s low, which also closely aligns with the December 2018 trough. A bounce here could indicate the completion of an
Elliot Wave
pattern with five price swings.
A
breakdown
below this area could see the shares revisit lower support at the
psychological
$30 level. Bargain hunters may be on the lookout for
buy-and-hold
opportunities in this location near the October 2018
swing low
and March 2020 pandemic trough.
Key Resistance Levels to Monitor
Upon further upswings, investors should keep tabs on the $50 level. Tactical traders who bought at lower prices may decide to
lock in profits
in this region near a trendline that connects the February low with a range of corresponding trading activity on the chart between April 2019 and September 2020.
Finally, buying above this level could see Microchip shares climb to around $56. This area on the chart would likely provide overhead resistance near multiple
peaks and troughs
on the chart stretching back to early 2020.
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for more info.
As of the date this article was written, the author does not own any of the above securities.
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