This week’s Consumer Electronics Show (CES) has been a decent one off and on the price chart for Micron Technology (NASDAQ:MU). Still, in an ever-volatile MU stock known for its ability to turn the tables on investors, is now a good time to buy shares?
2020’s CES in Las Vegas has been a big deal with the latest technologies on full display. The show has been made even bigger as the world’s largest company, Apple (NASDAQ:AAPL), showed up for the first time in nearly three decades. But the conference has also delivered a strong hand for memory specialist Micron’s investors in more than one way.
The event has rekindled optimism that the roll-out of 5G technology will act as a major catalyst for increasing DRAM demand and chip pricing. It also helped to unwind 2019’s supply glut which stymied Micron’s growth. An improved memory market would be a boon for MU stock’s top-line. It should also drive significantly stronger profitability as Micron stock is able to leverage its strong cost position within the market.
This year’s event also saw Micron management unveil its latest DRAM products and bolster investor confidence with updates on its licensing agreements with China’s Huawei Technologies. The takeaway from CES was enough for Cowen to upgrade MU stock to “outperform.” The firm also lifted its 12-month price target from $50 to $70 a share. For their part, investors were also spied anteing up as Micron stock surged higher by nearly 9% on Tuesday following the announcements.
The question now is whether today’s Micron investors have gotten ahead of themselves? Based on the MU stock price chart, the answer clearly depends on how you like to play the game.
Micron Stock Weekly Chart
Source: Charts by TradingView
Despite 2019’s DRAM issues, Micron stock investors were handsomely rewarded. That’s not to say gains came easy. MU’s notoriously volatile price action was an inescapable reality, as the provided weekly chart affirms. Nevertheless, by the end of the year Micron delivered a market-topping return of around 64%.
Looking ahead into 2020 and Micron’s business narrative firming up, it’s safe to say last year’s leading price action puts MU stock in strong position for continued upside. Classically, the past 1.5-plus years have amounted to a large corrective cup-shaped base forming. Micron stock is now in the right side of the pattern.
Following this week’s CES-driven bid, MU stock has broken out from a small and constructive ‘handle’ consolidation that developed above the 62% retracement level within the larger base. The price action was confirmed by heavier and above-average volume. And with shares less than 2% above the handle’s breakout price of $56.11, MU is offering an attractive entry.
Bottom-line for today’s investors, price momentum out of the bullish pattern is the name of the game. This is especially obvious given MU stock’s overbought stochastics and price position through the upper Bollinger Band. That said, bet on continued strength. But to avoid overplaying a potentially bad hand, an exit strategy beneath $52 looks like smart business off and on the price chart.
Investment accounts under Christopher Tyler’s management currently own positions in Micron (MU) 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.