VMware, Inc. (VMW) Builds a Head of Steam

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Shares of virtual virtualization and cloud company VMware, Inc. (NYSE:VMW) have managed to rebound sharply over the past 10 months or so. Year-to-date, VMW stock is in the green to the tune of close to 30%. And the momentum behind VMware and the underlying story points to still higher stock prices.

Beat the BellWhen VMware reported its latest quarterly results on July 18, its earnings of 97 cents per share beat analyst estimates for 95 cents. Revenues of $1.69 billion also were just enough to squeeze past estimates for $1.68 billion. VMW also upped its guidance. Some analysts were encouraged that VMware didn’t see a material sales impact from the Brexit, too.

All of that allowed VMW stock to rally by about 9% the following day.

Cloud stocks still are hot from a growth perspective. However, many investors still are somewhat scared or skeptical of this industry, so the stocks here actually offer some opportunity from an investor psychology standpoint. But to understand where the opportunity might lie for VMW stock, we have to get a handle on the big picture.

VMW Stock Charts

On the multiyear weekly chart, we see that VMW in summer 2011 began slipping into a major consolidation period that, aside from a couple of outlier moves, kept it range-bound until October 2015.

In October 2015, VMware stock tumbled materially, and the selling pressure did not ease up until early 2016. By early February, however, VMW began a steep ascent higher along with the broader stock market. This has pushed it back up to a previous toggle point (black horizontal) around the low to mid-$70s, which might offer some better technical resistance.

VMware VMW stock chart weekly view
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If we zoom over to the daily chart, however, we see that VMW stock has spent the past few weeks in a tight consolidation phase, which followed the sharp post-earnings really in mid-July. Note also that VMW stock gapped higher in mid-April after earnings. That served as a good momentum boost, though VMware settled into a consolidation period.

So while this year’s rally off the February lows has been steep in percentage terms, it has for the most part been orderly.

VMware VMW stock chart daily view
Click to Enlarge

The most recent multi-week consolidation period now looks poised to push VMW stock higher sooner rather than later. Look for a next price target in the high $70s. Any bearish reversal and daily close below $70 should be respected as a stop-loss signal.

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Article printed from InvestorPlace Media, https://investorplace.com/2016/08/vmware-inc-vmw-stock-run/.

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