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Is ARM stock primed to break out this week?

Is ARM stock primed to break out this week?
Elmaz Sabovic

Despite gloomy forecasts regarding Arm Holdings’ (NASDAQ: ARM) future and its stock following the IPO lock-up expiration, which anticipated significant sell-offs, the past week has shown an upward trend in ARM stock. It appears poised for considerable upward movement with substantial potential.

Specifically, when we examine the price chart, it’s evident that ARM shares are displaying a tight setup. 

This setup has the potential to trigger a surge in ARM stock, with a significant resistance level currently set at $137.15. To trade higher, ARM stock will need to surpass it.

ARM stock price chart and setup. Source: TrendSpider
ARM stock price chart and setup. Source: TrendSpider

In February, a similar pattern emerged due to lower volume, after which ARM shares experienced a substantial increase in value. Given the resemblance of the current setup, another squeeze might be on the horizon.

What technicals have to say about ARM stock?

In the latest trading session on March 22, ARM stock closed at $134.15, marking a 0.41% gain from the previous session. Over the past five trading sessions, it has made notable progress, rising by 4.68%.

On a year-to-date (YTD) basis, ARM stock has impressively increased by 94.65% in price.

Regarding support and resistance levels, there’s a support zone ranging from $129.66 to $129.89. This zone is formed by a combination of multiple trend lines and important moving averages in the daily timeframe. The next resistance zone is established at $137.

ARM stock YTD price chart. Source: Google Finance
ARM stock YTD price chart. Source: Google Finance

After analyzing the technical indicators, the general outlook for ARM in the upcoming days appears to lean towards a bearish sentiment. Although there are mixed signals regarding momentum, the trend indicators, volatility, and volume analysis together indicate a potential decline in the stock price.

An important observation is the MACD line crossing below the signal line, typically interpreted as a sell signal in stock trading.

Technical indicators for ARM stock. Source: Kavout
Technical indicators for ARM stock. Source: Kavout

Why are analysts worried about Softbank and ARM stock relationship?

During the IPO period, Arm Holdings disclosed that it had identified material weaknesses in its internal control over financial reporting, and it may uncover more in the future.

Additionally, ARM’s disclosures raise concerns that Softbank could exert influence over Arm Holdings, potentially leading to actions that ARM shareholders might not view as beneficial. These actions could prioritize Softbank’s interests over ARM’s stock value.

ARM also warns about possible financial irregularities from Softbank and their potential impact on the inflated value of Arm Holdings. Specifically, ARM highlights the risks associated with Softbank’s $9 billion borrowing, which is collateralized by 75% of ARM stock.

Given Softbank’s significant influence over ARM stock, investors should carefully consider this aspect when evaluating the company.

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