SMCI cracks: Let’s see how this bearish engulfing candle works

The shares of Super Micro Computer have been a GME-style phenomenon in the last month, tripling as shares rose nearly every day. They touched $1080 in the pre-market but it’s been a rush to exits.

There is major options trading in this pair, including massive volumes of trade in the past day. The price action has been reminiscent of the legendary bubble in Gamestop.

Options implied volatility is now extremely high, pricing in a 5.1% move every day for the next year, with calls being more expensive than puts (it’s usually the opposite).

The fundamentals don’t really matter in a market like this, even though BofA was out with a $1040 target yesterday. It’s obviously a FOMO, momentum trade and that’s why the technicals are so important to watch. On that front, we’ve got a big bearish engulfing candle shaping up on the daily chart. A close below Wednesday’s high of $880 would be particularly damaging.

All that said, markets like this can get extremely irrational so don’t try to be a hero.

This article was written by Adam Button at Source