MicroVision Continues To Spike Higher: Why A Retracement Is On The Horizon

MicroVision, Inc MVIS surged over 15% at one point Wednesday morning after closing Tuesday’s session up 30.39%, possibly as a result of a short squeeze.

The stock has soared about 240% since April 27, when MicroVision bounced off support at $1.82 and created a double bottom pattern at that level. Since then, MicroVision has formed two bull flags that were recognized and confirmed the stock is trading in an uptrend.

An uptrend occurs when a stock consistently makes a series of higher highs and higher lows on the chart.

The higher highs indicate the bulls are in control while the intermittent higher lows indicate consolidation periods.

Traders can use moving averages to help identify an uptrend, with rising lower time frame moving averages (such as the eight-day or 21-day exponential moving averages) indicating the stock is in a steep shorter-term uptrend.

Rising longer-term moving averages (such as the 200-day simple moving average) indicate a long-term uptrend.

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The MicroVision Chart: MicroVision hasn’t formed a higher low on the daily chart since May 23, which suggests a retracement lower is likely on the horizon. The stock’s relative strength index (RSI) is also measuring in at about 91% and has been in overbought territory since May 15.

• When a stock’s RSI exceeds 70% it can be a sell signal for technical traders, although it should be noted that RSI levels can remain extended to both the upside and the downside for long periods of time. Traders wanting to enter may choose to wait for a pullback, which will eventually take place.
• MicroVision’s 50-day simple moving average (SMA) is likely to cross above the 200-day SMA over the next few trading days, which will cause a golden cross to form. The stock has become extended from the eight-day exponential moving average, and when MicroVision eventually pulls back, it may back test that level.
• MicroVision has resistance above at $8.18 and $10.66 and support below at $6.85 and $5.07.

Photo via Shutterstock.