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Key Takeaways
- Arm shares plunged ahead of Thursday’s opening bell after the British chip designer’s light profit guidance overshadowed quarterly results that came in above expectations.
- Monitor if bulls can successfully defend an uptrend line that stretches back to the October 2023 low.
- A successful hold of the indicator could see a resumption of the stock’s longer-term uptrend, while a breakdown may signal a change in trend direction.
- Upon a close below the uptrend line, Arm shares could find chart support at key levels including $117, $94, and $79.
Arm Holdings (ARM) shares plunged ahead of Thursday’s opening bell after the British chip designer’s light profit guidance overshadowed quarterly results that came in above expectations.
Projected post-earnings selling follows a deep retracement in the shares of up to 32% from their record high set last month amid concerns over the stock’s lofty valuation and broader profit taking in some of this year’s best performing artificial intelligence (AI) stocks. Still, since going public on Sept. 14 last year, Arm shares have more than doubled through Wednesday’s close.
The stock was down 8.4% at $132.05 in recent premarket trading.
Below, we’ll point out a key technical indicator on the Arm chart to monitor following the company’s earnings report, while also identifying important price levels to watch amid a possible breakdown of the stock’s longer-term uptrend.
Uptrend Line Remains in Play
Despite recent selling, Arm shares found support earlier this week from a multi-month uptrend line that stretches back to the October 2023 low.
This key trendline remains in play post-earnings, given the chip designer’s stock sits poised to open below the indicator on Thursday. Investors should monitor if bulls can successfully defend the trendline, which currently sits around $135, for a second time this week. An intraday reversal, such as a hammer candlestick or bullish engulfing pattern, would mark a major shift in sentiment that could see a resumption of the stock’s longer-term uptrend.
However, a decisive volume-backed breakdown below the indicator may signal a change in trend direction, a move that could lead to a continuation of the stock’s recent decline from its all-time high (ATH).
Monitor These Levels Upon Trendline Breakdown
Upon a close below the uptrend line, investors should keep an eye on three important support levels.
Firstly, it’s worth eyeing a horizontal line around $117, which could attract buying interest near the low of a mid-February pullback that roughly aligns with period of two-week consolidation in May.
Further downside could see the price revisit the $94 level, a location on the chart that may provide support near the opening price of the Feb. 8 earnings gap.
Finally, a more severe selloff could trigger a gap fill down to $79, where bulls would likely be looking for buying opportunities near two prior record highs that formed in December 2023 and January this year.
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As of the date this article was written, the author does not own any of the above securities.