Micron Technology (MU), the memory-chip maker on Thursday afternoon reported its fourth-quarter results. While the company’s sales topped analyst estimates, coming in 43% higher year-over-year, earnings per share disappointed — $0.20 vs. analyst estimates of $0.24. Add in better-than-expected revenue and you get a mixed initial reaction in the stock. At one point after-hours MU stock dipped as much as 4.5% to $17.60, but it quickly rebounded to make for a choppy and directionless initial reaction.
I have discussed MU stock and its seemingly endless rise several times this year. The stock year-to-date is the best performer in the Philadelphia Semiconductor Index, up a stunning 190%.
To get an idea of where the stock currently trades, however, we must zoom out and take a peek at the price action since September 2006. MU, once a highflying monster of a stock in the late ’90s and the internet bubble, was beaten into submission as reality hit and the bubble popped. After a massive drop from glory, the stock marked an important reference point in September 2006, where it developed a lower high; after a seven-year lull the stock finally retested this level over the past two weeks.
Through this longer-term lens, the arrival back at this level is healthy, although the slope of the 2013 rally is steep by just about any measures.
A strongly trending stock (such as MU stock presently is) offers plenty of parallel trend lines and moving averages that traders and investors alike can use as reference for support and resistance points. Until now the stock has offered nothing but frustration this year to those attempting to fight the steep trend in which MU stock has trucked higher. Each time the stock looked to correct, it merely shuffled sideways … only to gain more steam for another push higher. The July-to-early-September consolidation phase is a good example, as MU stock merely mean-reverted, allowing it to consolidate over time, bumping into its November 2012 uptrend before shooting higher still.
In other words, the stock remains in a solid uptrend — fighting this move is not a good idea. It remains to be seen what the first true reaction to the stock’s earnings report looks like, but MU stock’s first support is at $17.50, followed by bigger support at $15 to $15.50. As long as those support levels hold, MU stock is better traded from the long side.
Serge Berger is the head trader and investment strategist for The Steady Trader. Sign up for his free Weekly Market Outlook Video here. As of this writing, he did not hold a position in any of the aforementioned securities.
