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Key Takeaways
- Shares in Dexcom plunged in extended trading Thursday after the medical devices company posted second quarter results that came in below Wall Street expectations and slashed its annual revenue forecast.
- Dexcom shares look set to break down from a symmetrical triangle, a chart pattern that often precedes a trending move in the direction of the breakout.
- The Dexcom share price could attract buying interest at key chart levels including $70, $52, $37, and $24.
- On the four occasions the relative strength index has fallen below the 30 threshold since 2016, the stock has gone on to gain at least 40% within the next six months.
Shares in Dexcom (DXCM) lost more than a third of their value in extended trading Thursday after the medical devices company posted second-quarter results that came in below Wall Street expectations and slashed its annual revenue forecast.
Below, we zoom out on Dexcom’s weekly chart and use technical analysis to identify important price levels to watch out for amid earnings-fueled selling.
Expected Breakdown From Symmetrical Triangle
Dexcom shares have oscillated within a symmetrical triangle since mid-November last year. The well-known chart pattern, which consists of two converging trend lines that connects a series of sequential peaks and troughs, represents a pause in the prevailing trend as bulls and bears reach an equilibrium.
Typically, the pattern precedes a trending move in the direction of the breakout, which in the case of Dexcom shares, is expected to be lower after the company’s disappointing sales outlook.
Monitor These Key Levels Amid Earnings Sell-Off
Despite the bears looking likely to take control in the short term, investors should monitor four specific areas on the chart where the stock could attract buying interest.
The first level sits at $70, a location where the shares could encounter support from a horizontal line linking a February 2020 price peak with the lowest point of the symmetrical triangle.
A failure to hold the above area could see a decline to around $52. This region may find support from the low of two profit-taking areas on the chart in December 2019 and during the pandemic-induced rout in March 2020.
Further selling could trigger a decline to the $37 level, where the price may attract buyers near several prominent price peaks and a period of narrow consolidation that formed between September 2018 and October 2019.
Finally, a more severe longer-term correction may see the shares revisit $24, where a level of significant prior resistance on the chart could flip into support.
It’s also worth keeping an eye on the relative strength index (RSI), which looks set to move into oversold territory following the earnings-fueled selling. On the four occasions the indicator has fallen below the 30 threshold since 2016, Dexcom shares have gone on to gain at least 40% within the next six months.
Dexcom shares fell 37% to to $68.15 in after-hours trading Thursday.
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