Shares of large-capitalization technology stocks, including semiconductor names such as Micron Technology, Inc. (NASDAQ:MU) have come under pressure in recent weeks. MU stock has had a nice mean-reversion move lower and could consolidate or bounce somewhat in the immediate term. Through a multi-week lens, however, the stock still looks to have unfinished work to do on the downside.
So you know and for perspective, when I last offered my take on MU stock on March 7 I called the stock increasingly overbought and ripe for profit taking. Since then the stock is more than 10% lower.
Micron Stock Charts
Moving averages legend: red – 200 week, blue – 100 week, yellow – 50 week
Looking at the longer-term weekly chart of MU stock, we see that off the summer 2016 lows, the stock has essentially climbed higher in a channel that we can draw with three parallel lines.
In November 2017, the stock overshot its lower part of the channel, which promptly led to a mean-reversion move lower to retest the lower end of the up-trends. Then another wave of strong buying came in and drastically overshot the stock above the upper end of the entire channel by mid-March. That move, too, has since been bet with selling as the slope is simply too steep to sustain. Ultimately MU stock in my eye would do well to drop back to the low $40s for a better reward to risk entry for traders and investors.
Moving averages legend: red – 200 day, blue – 100 day, yellow – 50 day
On the daily chart, we see that the selling in MU stock over the past couple of weeks has brought it back to the blue box, i.e.a former trading range, as well as back to the yellow 50 and blue 100 day simple moving averages. A bounce around here cannot be ruled out, and in fact if the stock were to see a strong bullish reversal on weekly closing basis then a move back to the $60 area is possible.
Through a multiweek/month lens, however, and considering the broader technology stock weakness, MU stock may now be ready to make a series of lower highs and ultimately drop into the low $40s. If and when the low $40s are reached then any strong bullish reversal that sticks a landing at least on a daily closing basis could be used to try long-side swing trades.
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