Monolithic Power Systems, Inc. (NasdaqGS: MPWR)

Monolithic Power Systems, Inc. is a fabless semiconductor company that designs, develops and markets analog and mixed-signal semiconductors. Monolithic Power combines advanced process technology with its analog designers to produce high-performance power management integrated circuits for direct current to DC converters, light emitting diode drivers, cold cathode fluorescent lamp backlight controllers, Class-D audio amplifiers, and other linear integrated circuits. The company has Its products are used in computing and network communications products, flat panel televisions, set top boxes and a range of consumer and portable electronics products. Monolithic Power operates in Taiwan, China, Korea, Japan and Europe. Its products include DC to DC converters, lighting control products and alternating current (AC)/DC offline solutions and audio amplifiers.

Before discussing the potential trading opportunities with MPWR (Monolithic Power, Inc.), please review the 1 yr. chart of MPWR that I have outlined below, with my added notations:

MPWR seems to have created (2) very important price levels in which to trade off of. First, the $13 resistance (maroon), which was also previous support in March. Second, the $11 level (navy) has been support both before the September drop and after the early October rally. MPWR is currently trading in between those (2) levels and appears to be on its way down to the $11 level again.

The Tale of the Tape: MPWR is trading between (2) important price levels at $11 and $13. A rise to the $13 resistance would be a great opportunity to enter a short trade, while a break above that $13 could be a nice long trade. A trader could also enter a long trade on a pull back down to the $11 support, or a short trade on a break below the $11.

Before making any trading decision, decide which side of the trade you believe gives you the highest probability of success. Do you prefer the short side of the market, long side, or do you want to be in the market at all? If you haven’t thought about it, review the overall indices themselves. For example, take a look at the S&P 500. Is it trending higher or lower? Has it recently broken through a key resistance or support level? Making these decisions ahead of time will help you decide which side of the trade you believe gives you the best opportunities.

No matter what your strategy or when you decide to enter, always remember to use protective stops and you’ll be around for the next trade.  Capital preservation is always key!

Good luck!
Christian Tharp, CMT