Pre-Earnings Marvell Technology Pullback May Be a Buy Signal

Short interest accounts for over 6% of the stock's available float

by Emma Duncan

Published on Aug 26, 2019 at 2:25 PM
Updated on Jun 24, 2020 at 10:16 AM

Semiconductor stock Marvell Technology Group Ltd. (NASDAQ:MRVL) has been outperforming on the charts in 2019. In fact, just last month, the shares climbed to a 13-year peak of $27.64, and now sit 46% higher year-to-date. Over the past week, though, the stock has pulled back amid U.S.-China trade uncertainty, but according to data from Schaeffer's Senior Quantitative Analyst Rocky White, this may be just the right time to bet on MRVL's next leg higher. 

Specifically, Marvell Technology stock has pulled back to technical support at its 120-day moving average, which has proven to act as support in the past three years. Per White, there have been four other tests of support at this trendline over that time frame, resulting in an average one-month gain of 7.2%, with 75% of the returns positive. A lift of similar means would catapult the shares back above $25, based on their current perch at $23.76.

Daily MRVL with 120MA

Looking ahead, the company is slated to report earnings after the market closes this Thursday, Aug. 29. Over the past eight quarters, the security has closed higher the day after earnings five times. This time around, the options market is pricing in a one-day, post-earnings swing of 10.2%, regardless of direction, compared to an average post-earnings move of 2.7% over the past two years.

Meanwhile, short interest on the security currently accounts for 6.4% of the stock’s total available float. This equates to more than three days’ worth of pent-up buying power, at MRVL’s average pace of trading. An unwinding of these positions could add another layer of support for the shares. 


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