Marvell Technology Group (MRVL) is favorite of Jim Cramer and an Action Alerts PLUS holding, but with earnings due out this Thursday after the close a fresh look at the charts seems like a good idea.
We last reviewed MRVL on Oct. 9 and wrote that, “In the middle of September we noted that MRVL had a risk of a downward correction but weakness really did not materialize and prices soon soared to new highs. Longs should raise stop protection to a close below $38. Our price targets are $46 and $57.” Prices touched our $46 price target Monday morning so let’s see if there is any need for a strategy adjustment.
In the updated daily bar chart of MRVL, below, we can see that the shares have reached our $46 price target and some bearish divergences have developed. The stock is still in an uptrend and trading above the rising 50-day moving average line and above the rising 200-day moving moving average line. Moving averages are lagging indicators so let’s check further.
The trading volume has declined in November even though prices made a new high and that is not what old chart readers like myself like to see. We want to see volume increase on the rally. The On-Balance-Volume (OBV) line made a peak in October and its recent movement is a bearish divergence compared to the price action. Sellers appear to be more aggressive into the new high this month.
The 12-day price momentum study has made equal highs from September to October to November, which is another bearish divergence when compared to prices making new highs in the past three months.
In the weekly bar chart of MRVL, below, we can see some longer-term divergences. The shares are still in an uptrend above the rising 40-week moving average line but the weekly OBV line has not confirmed the new price highs and the 12-week price momentum study shows lower highs from June for a more important bearish divergence.
In this daily Point and Figure chart of MRVL, below, we can see that the shares have reached a price target of $44.58.
Bottom-line strategy: With the shares reaching our $46 price target and a number of bearish divergences grabbing our attention ahead of earnings on Thursday I would recommend booking profits here and standing aside until we see how the stock reacts on Friday.
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