Conclusion, Investment Implications, Strategy
Microchip Technology Incorporated (MCHP) is breaking down from two month of sideways investor indecision, warning that a significant top is in place at the Jun 5th high. A sustained decline below the $100.50 area would help to confirm this and target an additional 15% decline to $84.30 per share.
Analysis and Rationale
Microchip Technology Incorporated (MCHP) develops, manufactures, and sells semiconductor products for various embedded control applications in the Americas, Europe, and Asia. The company offers general purpose and specialized 8-bit, 16-bit, and 32-bit microcontrollers; 32-bit microprocessors; and microcontrollers for automotive, industrial, computing, communication, lighting, power supplies, motor control, human machine interface, security, and wired and wireless connectivity applications. Microchip Technology Incorporated was founded in 1989 and is headquartered in Chandler, Arizona.
Chart 1 below plots MCHP daily since December 2019, highlighting in blue two months of sideways investor indecision following the Jun 5th failed attempt to set a new high. The red highlights show that MCHP has been breaking down from this indecision area this week, warning that a significant top is in place at the Jun 5th high.
A sustained decline below the lower boundary of this indecision area, currently at $100.50, would help confirm this and target an additional 15% decline to $84.30 per share.
Table 1 below shows that, considering the aforementioned downside target and a protective stop placed above the $104.19 area, a short entry price of $99.29 would provide a 1:3.1 risk/reward ratio (risking $1.00 to make $3.10) with an initial risk of 4.9%.
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