Microvision, Inc (NASDAQ:MVIS) shares spiked over 12% higher at one point on Friday, after sinking over 10% in one instance Thursday due to a bearish reaction to the company printing a first-quarter earnings miss.
The stock was trading over 2.5% higher Friday afternoon, defying the general markets, with the S&P 500 trading down about 3.2% lower.
The lidar sensor development company has lost over 88% of its value since April 27, 2021, when it hit a high of $28. The most recent downturn has started to print a curl to the upside on the daily chart, which could develop into a cup-and-shoulder pattern on the daily chart.
A cup-and-shoulder pattern can be either a powerful reversal indicator when found at the bottom of a downtrend or a continuation pattern when found in an uptrend.
The pattern is formed when a security forms a rounded trough (cup) and then rises upwards before consolidating downward between two parallel lines (handle). The handle should begin to form before the stock has risen up as high as the top of the left side of the cup.
When the security breaks up through the handle on higher-than-average volume, it indicates the pattern was recognized, and a rally may follow.
- Aggressive bullish traders may choose to enter a security in a cup-and-handle pattern on the initial rise, with a stop below the lowest price in the cup. More conservative traders may wait to enter a position on a break up from the handle of the pattern on higher-than-average volume.
- Bearish traders may wait to enter into a position if the security falls below the lowest price within the cup formation, which negates the bullish cup-and-shoulder pattern and indicates an accelerated move to the downside may follow.
Want direct analysis? Find me in the BZ Pro lounge! Click here for a free trial.
The Microvision Chart: Microvision’s possible cup-and-handle pattern began on March 30, after the stock topped out at the $5.86 level the prior trading day. The stock then fell to the $2.85 level on April 22 and on Thursday, when Microvision retested that level as support. Tt created a bullish double bottom pattern and the stock began to curl upward.
- On Friday, Microvision printed a higher high above the most recent high of $3.30, which was printed on Wednesday. The higher high suggests Microvision will reverse course into an uptrend, although the stock will need to form a higher low above Thursday’s low-of-day to confirm the trend.
- Microvision regained the eight-day exponential moving average (EMA) as support on Friday and bullish traders will want to see the stock close the trading day above that indicator. If Microvision is able to regain the 21-day EMA as support and the stock prints another higher high, the eight-day EMA will eventually cross above the 21-day, which would give bulls more confidence going forward.
- Microvision’s relative strength index (RSI) has printed a series of higher lows and higher highs, which indicates bullish momentum is present. On Friday, the RSI indicator crossed above its average, which is also bullish.
- Microvision has resistance above at $3.45 and $5.07 and support below at $2.67 and $1.84.
