by Serge Berger | January 9, 2014 8:15 am
Computer chip manufacturer Micron Technology (MU) announced a Street-beating report late Tuesday that caused a significant pop in MU stock yesterday.
First-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.
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’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.
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