Bermuda-based Marvell Technology Group (NASDAQ:MRVL) has not been a stock for the lighthearted during the past few years. At its lows in late 2008, the stock was trading around the $5 mark. It rebounded into the low $20s by the spring of 2010, and by the end of 2012, it was back down in the $7 area.
While these gyrations may have brought long-term investors much frustration, the stock's roller-coaster ride offered plenty of opportunities for traders keeping a close eye on the stock. Most recently, after breaking past a multi-year downtrend line in early May, MRVL looks to be setting up for further gains in the medium term, barring any negative surprise headlines.
On the news front, it should be mentioned that Marvell Technology Group is rumored to be competing for a major contract to supply hard drives to Apple (NASDAQ:AAPL). The reaction to this potential headline will be more important than the headline itself, but I thought it was worth pointing out. As a technically-oriented trader I tend to discount much of the news flow, which is different than saying I am not aware of news in the stocks that I watch closely.
On the chart below, you can see that after an already steep incline MRVL took a near vertical leap, developing a major high in early February 2006 around the $36 level. From there it cascaded lower over the ensuing two years, finding a low in late 2008 near $5.
After putting together an impressive rebound into early 2010, MRVL ran out of steam again. The stock's 2010 highs between $22 and $23 coincided with a little more than a 50% retracement of the entire 2006–2009 correction.
After another big drop, MRVL finally found footing in late 2012/early 2013 around the $7 level, which relative to the 2008 lows marked an important higher low. The year-to-date rally has taken MRVL back up to the 2006 diagonal line of resistance. An eventual break past this level would be bullish for the long term.
To summarize, Marvell stock has behaved well technically.
Looking closer at the stock's 2013 uptrend, which at its peak in late May was up 64%, note that MRVL is once again right at the lower end of the uptrending channel. If there is a time for the stock to bounce, it is right here, right now. But a break below the $10.60 level could accelerate the stock lower for a revisit of the April lows near $9.50.
Zooming in even closer on the next chart, note that MRVL is currently snuggling up to lateral support, which served as resistance in March and spans from roughly $10.60 to $10.80. This support area is further enhanced by the 50% retracement mark of the sharp rally off the April lows. In other words, the stock currently sits near a confluence area of support.
If the stock can get a bid and move past $11.25 in the coming days it might just get enough mojo going for a move to the $12 area, which marks the 2006 downtrend line.
Recommended Trade Setup:
-- Buy MRVL on a daily close above $11.25
-- Set stop-loss at $10.80
-- Set initial price target at $12 for a potential 7% gain in 4-8 weeks
- Investment & Company Information
- Marvell Technology Group