Shares of Micron Technology, Inc. (NASDAQ:MU) have “corrected” about 15% since topping out in early June. Given this is one of the most closely followed stocks in the active investing and trading community, it has more than a few relentless bulls in an emotional tailspin.
But because losing grip over one’s emotions in this business is usually a result of lack of perspective, let’s take an objective look at MU stock through the lens of multiple time frames. Hint — so far, the stock remains in a bullish trend.
When Micron reported its latest earnings on June 29, investors weren’t too cheery and the stock dropped another 7.4% over two days following the report, thus reporting the near-term “topping out” process that took place earlier in the month. Price action has an uncanny ability to forecast, if taken with the right amount of perspective.
MU Stock Charts
Moving averages legend: red – 200 week, blue – 100 week, yellow – 50 week
On the multiyear chart, I plotted MU stock in the top half and the semiconductors as a group and represented by the Market Vectors Semiconductor ETF (NYSEARCA:SMH) in the bottom half. Note that while MU stock is up by nearly 31% for the year, through the multiyear lens it has been significantly more volatile than the overall semiconductor group. To wit, the SMH ETF however is also higher by just about 20% for the year.
Put differently, while MU stock has a tendency to act more volatile, its big picture up-trend is supported by a still strong broader bull market on the group level. This alone for the patient trader and active investor should help to cool some nerves.
Moving averages legend: red – 200 day, blue – 100 day, yellow – 50 day
Zooming in on the price action of MU stock a little more, we see that on the daily chart, the stock over the past few days has marginally broken below the blue 100-day simple moving average for the first time since breaking above it in May 2016. While that does show some near-term weakness, it is notable that the stock remains holding its up-trend from June 2016 and so far has merely mean-reverted back to the lower end of the up-trending channel (black parallels).
Over the past couple of days, I have heard many Micron Technology bulls call out buy signals, which while the up-trends remain intact in my eye, is too early to act upon. Considering that price is the ultimate arbiter in the markets, before buying back into MU stock I would first like to see it stage a bullish reversal or a strong one- or two-day rally that pushes the stock back above the $30 mark and thus would signal seller exhaustion.
If and when MU pushes back above the $30 mark, then a next upside target in the $33-$34 area could be targeted while a drop-and-hold back below $28 could act as a stop loss signal.
Check out Anthony Mirhaydari’s Daily Market Outlook for Aug. 3.
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