The chart of VMware (NYSE:VMW) stock is stuck between a rock and a hard place. It has trailed the Nasdaq by a mile over the past year, turning what used to be a beautiful uptrend into a choppy mess. Today we’ll take a fresh look at VMware’s stock chart to identify the price levels that matter moving forward.
Long-time followers of VMware stock may recognize it as a movie they’ve seen before. Here’s the script. A momentum stock rises like a rocket ship, fueled by the twin boosters of earnings growth and sweetening sentiment. Double-digit, and even occasionally triple-digit annual gains become commonplace.
Then, inevitably, excesses arise and perception is driven past what reality can sustain. An awakening happens, usually in the form of an underwhelming earnings report. Disappointment sets in. Sharp losses are had, a rapid-repricing occurs. Shareholders question what was once unquestionable.
On the price action front, support levels are smashed, and longer-term moving averages that have held for years finally give way. Distribution, or high volume down days, multiply like rabbits as institutions go from net buyers to sellers. Volatility expands ushering in a more treacherous environment for traders.
The patience and pain tolerance of long-term investors is tested and tested again. Eventually, a new equilibrium forms. With the froth now removed and a more sustainable price found, the volatility monster departs and calm returns.
VMware Stock Charts
Last May’s earnings report spelled the death knell for its once-great uptrend. We’ve been grappling with the fallout ever since. The following two announcements (in August and November) failed to reignite the trend, and its price action remains sloppy to this day.
Things worsen when you look at VMW from a relative perspective. In a day when so many other tech stocks are flying, and the Nasdaq is courting record highs daily, VMware quickly gets relegated to the “why bother?” bucket. It’s worth keeping an eye on which levels, if broken, would signal optimism is returning, and a change of tune is warranted.
On the weekly view, support and resistance are easy to spot. The pivot high seen before November’s earnings whack is the line in the sand that buyers need to take out before the bigger picture points to recovery. Set an alert at $173. On the downside, $145 has held firm for months withstanding multiple bear raids. As long as we’re above it, I like buyers’ chances.
You can better see the multiple tests at $145 on the daily time frame. Its failure will make bear trades mighty attractive. If you want a bullish signal without having to wait for a rally above $173, then last week’s highs of $159 will do the trick. It marks the north end of VMware stock’s two-month trading range.
Feb. 27 is the date of the next earnings report, and the stock has a history of significant gaps, so keep any trades close to the vest if you don’t want to brave the binary event.
As of this writing, Tyler Craig didn’t hold positions in any of the aforementioned securities. For a free trial to the best trading community on the planet and Tyler’s current home, click here!
