With trade war tensions heating up once more and less-certain victory on the price chart, are shares of Micron Technology (NASDAQ:MU) still a buy? Let’s take a peek at what’s happening in order to reach a stronger risk-adjusted decision on where to buy MU stock in today’s market.
Relatively speaking, MU stock has been a dog the past couple months. A misread of Micron’s mixed earnings report by Wall Street quickly followed by October’s brief, broad-based spook proved a treat for investors first in line, but not so much for latecomers.
The fact is, Micron’s gains of around 10% since October’s bottom pale by comparison to most large-cap technology stocks. Semiconductor peer Advanced Micro Devices (NASDAQ:AMD) is up roughly 42%. Even the typically slow-to-move industry giant Intel (NASDAQ:INTC) is up roughly double MU’s take-down for its shareholders. INTC stock is also near all-time-highs. That of course is far from the situation in Micron stock.
With the U.S. saying it may retaliate with additional trade tariffs and signs of softening broader industry demand, is the writing on the wall for MU stock? Let’s take a look at the price chart once more to see if today’s fears warrant more merit than yesterday’s news.
MU Stock Weekly Chart
Despite its relative weakness, the good news in MU stock is that shares remain in a larger up-channel. However, since discussing Micron as a purchase in early October, I’m rightfully more cautious on the name.
Subsequent price action has formed a lower-high pattern which failed at channel resistance. What’s more, the price action was also unsuccessful in clearing MU stock’s 50% Fibonacci level dating back to its all-time-high from 2000. It could be an early warning for investors.
Coupled with a bearish stochastics crossover in neutral territory, it’s time for bulls to tread lightly in MU. Bottom-line, Micron stock could swing aggressively lower towards $37 – $38 while remaining in the larger bullish pattern. And that means there’s little reason to buy shares today.
Micron Stock Strategy
My suggestion for investors interested in buying MU stock would be to wait for one of two things to occur on the price chart. If shares can take out the recent lower-high pattern and rally through resistance at $50, a purchase of momentum looks very promising.
Alternatively, buying Micron shares on weakness under the right circumstances is another strategy to consider. For now, the best advice is to wait for weekly chart confirmation of a low to form. Typically, a two to three candlestick reversal pattern is how a bottom will develop. The additional time required by this entry should also help build a more supportive-looking stochastics setup and offer increased odds for a profitable investment.
Investment accounts under Christopher Tyler’s management currently own positions in Micron (MU), Advanced Micro Devices (AMD) and their derivatives but no other securities mentioned in this article. The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional options-based strategies, related musings or to ask a question, you can find and follow Chris on Twitter @Options_CAT and StockTwits.