If one sector has had the most trouble reconciling Donald Trump as our next president, it would be technology. The benchmark exchange-traded fund Technology SPDR (ETF) (NYSEARCA:XLK) was hit hard after the results. It then rallied toward the end of November, only to get chopped down. XLK is finding its footing now after Silicon Valley’s leaders attended a tech summit to greet and meet Trump, but at this point, who knows what’s next?
Fortunately, such questions have yet to really keep Micron Technology, Inc. (NASDAQ:MU) down.
The semiconductor company that was left for dead in 2015 is engineering a remarkable turnaround. Year-to-date, the PHLX Semiconductor Index is up 38%. Micron stock is one of the leaders of that charge, ahead 40%, easily besting prime-time rivals such as Intel Corporation (NASDAQ:INTC), which has gained just 5%.
While Micron doesn’t boast the most impressive financials — the company is fighting off depressed revenues and a net loss from last year — it’s still a fundamentally sound company. And in fact, efforts expended toward a recovery are really bearing fruit.
Micron Stock Has Credibility
Micron has invested significantly toward building its physical infrastructure, with property, plant and equipment costs rising 39% year-over-year in the third quarter. However, MU stock also saw a sizable dip in overhead costs, while simultaneously pumping up its research and development.
This isn’t just cost controls. This is smart and effective fiscal management.
Wall Street has taken notice of the blooming picture in Micron stock. The general sentiment right now is bullish, with 17 buys, six holds and four sells. It’s not the most overwhelmingly bullish consensus in the world, but it’s good — and most of the calls on MU over the past few months have been straight-up new buy calls or upgrades.
The options market is looking bullish, too.
Not to be outdone is the options market. Just days ago, InvestorPlace contributor Joseph Hargett pointed this out:
“The December/January put/call open interest ratio rests at 0.58, with calls nearly doubling puts among options set to expire within the next two months. What’s more, this ratio drops to 0.56 for the weekly Dec 23 series, indicating optimism specifically targeted at Micron’s quarterly report.”
There are plenty of cases I can make for MU stock, but it’s also a bullish side when analysts and traders are putting their money where their mouth is.
Technical Momentum Has Returned
Like virtually every other tech company, Micron stock had its breakout moment in the 1990s. For a time, it seemed like nothing could stop MU. Yes, it had stellar industry innovations, but to be real, enthusiasm was heavily due to the internet and tech bubble.
When that crashed, Micron stock attempted to gain back what it had lost. The multiple efforts were ultimately futile. This “robust failure” formed the second shoulder of a very, very long-term bearish head-and-shoulder pattern that originally developed in the mid-1990s. The financial crash of 2008 completed the negative implications for MU stock.
Click to Enlarge Moving forward, though, the trajectory is likely to the upside.
Micron isn’t quite overbought by RSI standards, it’s testing the 20-day moving average — which has crossed above the 50-day MA — but holding strong, and it keeps making a series of higher highs and higher lows.
Right now, MU looks about as good as you could want, though it’s at least toying with the thought of becoming overbought soon.
Bottom Line on Micron Stock
Tech can be a volatile sector that rivals biotechs for nausea, and Micron is in a pressured state.
But management is making the right moves, and analysts and traders are buying into MU, and the company’s story.
If I’m going to take a risk right now, Micron stock is a good one to take.
As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.
