Shares of semiconductor stocks and other large-capitalization technology stocks got off to a great start to 2018. Shares of Micron Technology, Inc. (NASDAQ:MU) for example are already up more than 9% in the first two trading session of the new year and while this may smell immediate-term overbought, through a multiweek/month lens, a next leg higher in this and other semiconductor stocks may just be getting underway.
U.S. large-cap technology stocks as a sector of the S&P 500 rose a stellar 33% in 2017. As I will discuss in my 2018 market outlook this coming week (look out for a special webinar invitation in this here column), while I expect more gains for technology stocks in 2018 these gains will also likely come among more volatility. As such, it will be incrementally more important for market participants to keep perspective on what is happening on a sector and group level, so as not to get chopped up and faked out by “normal” corrective periods.
MU Stock Charts
Moving averages legend: red – 200 week, blue – 100 week, yellow – 50 week
Looking at the multiyear chart of MU stock we see that while its rally from the 2016 lows into the 2017 highs measured more than 400%, in this grander scheme of things a breakout may have just started. Note that it wasn’t until the October 2017 period that this stock managed to push past the blue horizontal resistance area around the high $30s.
Clearly the stock does not have to continue rising at this rapid rate all through 2018, but the table looks to be set for further continuation higher following the technical hurdle that was overcome in 2017.
Moving averages legend: red – 200 day, blue – 100 day, yellow – 50 day
Moving over to the daily chart, we see that despite the good rally through 2017, MU stock has largely been stuck in a healthy consolidation period since getting near to intermediate term overbought in the second half of November. In fact, within this consolidation phase the stock managed to correct 20% in price terms, which likely shook out some weak holders of the stock and cooled off the bullish momentum crowd.
Note also that following the Dec. 19 earnings report, MU stock rallied for one day but then quickly fell again into year-end, all within this multi-week consolidation phase.
The two-day rally thus far in 2018 still has MU stock stuck within this consolidation phase as annotated by the black lines, but considering the broader large-cap and semiconductor stocks rally the consolidation phase may soon be over.
Active investors and traders could look to buy MU stock around the low-to-mid $40s for a next upside target around the $50 mark. A well-defined stop-loss could be set around $41.
Check out Anthony Mirhaydari’s Daily Market Outlook for Jan. 4.
Tell us what you think about this article! Drop us an email at editor@investorplace.com, chat with us on Twitter at @InvestorPlace or comment on the post on Facebook. Read more about our comments policy here.
Take Serge’s quiz to find out which trading strategy best suits your personality.
