Shares of semiconductor stocks as a group suffered losses last week, with the VanEck Semiconductor ETF (NYSEARCA:SMH) dropping nearly 6% for its worst one-week slide in 2017 thus far. Within this group shares of Micron Technology, Inc. (NASDAQ:MU) as a result have finally had a chance to work down the severe near-term overbought readings and are also arriving at a better technical area of support. Traders and active investors would be wise to take note, for a next bullish trade looks to be setting up very soon.
The technology sector of the S&P 500 as a whole has performed notably well again in 2017, and within this sector semiconductors have showed outstanding performance. The medium- and longer-term up-trends in this space remain well intact despite last week’s hiccup, which is to say that a buying opportunity should be just around the corner.
MU Stock Charts
Moving averages legend: red – 200 week, blue – 100 week, yellow – 50 week
On the multiyear weekly chart, we see that after a good rally in 2016 MU stock continued this ascent in 2017 and by September managed to break past its late 2014 highs around the $36 mark. Through this lens, what has been missing for me in order to add to long positions in MU stock is some sort of a re-test of this previous horizontal technical resistance area so as to prove its worth as technical support.
With last week’s drop, MU shares are now undergoing such a mean-reversion process which, however, could see lower prices still before a next rally.
Moving averages legend: red – 200 day, blue – 100 day, yellow – 50 day
On the daily chart, we see that MU stock last week fell back to the upper end of its up-trending channel and also managed to re-test its yellow 50-day simple moving average for the first time since the summer. From a momentum perspective MU stock could easily have more downside into the middle of this channel and toward its blue 100-day moving average in the $37 area, however given the stock’s popularity and the year-end dynamics of fund managers chasing stocks, it is possible that we see a next bullish reversal closer to the $40-$42 area.
Bullish reversals such as the one i am now waiting for by MU stock offer wonderful opportunities for traders and investors to put on income trades for monthly or quarterly income. If you would like to learn more about this strategy then please join my next webinar on this topic on Tuesday Dec. 5. Register HERE.
A bullish reversal for MU stock would now complete upon a significant 3% or more rally on a daily closing basis. If and when this takes place then the next upside target once again becomes the high $40s.
Check out Serge’s Daily Market Outlook for Dec. 4.
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