Micron Stock Breaks Out, Keeps Upside Momentum

Wednesday's breakaway gap in MU is promising in coming weeks

   
Micron Stock Breaks Out, Keeps Upside Momentum

Computer chip manufacturer Micron Technology (MU) announced a Street-beating report late Tuesday that caused a significant pop in MU stock yesterday.

beatthebell 185x185 Micron Stock Breaks Out, Keeps Upside MomentumFirst-quarter Micron earnings came to 30 cents per share, handily topping estimates of 21 cents. The top line for the period ending Nov. 28 came in at $4.04 billion, also better than the $3.72 billion expected, and more than double the year-ago period’s numbers.

More specifically, Micron saw sales of DRAM increase around 70% year-over-year and gross margins widen to 32%, from 25% in the previous quarter. The prices of DRAM also increased last year, and analysts believe they’ll continue to rise. Overall, the report was considered very strong, and management reiterated a good outlook and a “healthy market condition” for 2014.

On the back of the earnings report, Stifel Nicolaus maintained its “buy” rating on MU stock while raising the price target from $26 to $31 — a good 30% higher from here.

Although Micron stock rose more than three-fold in 2013, Wednesday’s nearly 10% pop in MU shows that shares look to remain in a strong uptrend, at least for the time being.

From a multiyear point of view, Micron stock broke past two crucial longer-term resistance lines in 2012, which I drew on the below chart.

MU weekly Micron Stock Breaks Out, Keeps Upside Momentum
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Although Micron stock’s heydays from the late 1990s and early 2000s are long behind us (and somewhat less relevant), there are none-the-less some reference levels on which we can focus. With the big 2013 rally, Micron stock has now retraced 25% of the entire selloff from its 2000 peak. Barring any nasty collapse of MU stock in coming months, this now opens shares up toward the $38 area (with a time frame of 12 to 18 months), which is where the 38.2% Fibonacci retracement comes in.

That’s the big-picture look at Micron stock from where I sit. Now let’s see what the daily charts have to offer.

MU daily Micron Stock Breaks Out, Keeps Upside Momentum
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MU’s best friend since late 2012 has been its 50-day simple moving average (yellow line), which once again firmly held as support earlier this week. After a strong November rally, the stock then became somewhat overbought and throughout December began to consolidate in a bullish pattern that technicians often refer to as a bull flag pattern.

With Micron stock then approaching its 50-day moving average on oversold momentum (see bottom part of chart), MU reached a confluence support area, which Tuesday’s earnings announcement then triggered into a major breakout.

From here, while some immediate-term consolidation is possible, Micron stock looks to have enough momentum to move toward the $26 mark in coming weeks.

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Learn more about the strategies Serge Berger uses to create profits in the market every day. Download his trading plan in the Essence of Swing Trading e-book by clicking here. As of this writing, he did not hold a position in any of the aforementioned securities.


Article printed from InvestorPlace Media, http://investorplace.com/2014/01/micron-stock-mu-charts/.

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