Lately many companies have endured seasonal bearish tendencies. And it could get nastier. But when it comes Micron (NASDAQ:MU), a memorable bullish cycle could be closer than many think. With that in mind, let’s take a closer look at why you shouldn’t’ count MU stock out just yet.
But first, here’s a little reminder of the latest market turmoil.
What goes up must go down … or so the age-old saying goes. Last week’s real-estate-driven fears — courtesy of China’s Evergrande — and Tuesday’s U.S. debt ceiling jitters quickly made that saying one to embrace. Oh, and don’t forget the cherries on top of it all: a broader market sporting double-digit gains and recent record all-time-highs.
For its part, the large-cap, tech-heavy Nasdaq stumbled by nearly 3%. Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) and Microsoft (NASDAQ:MSFT) lead the charge in a sea of red.
Not terribly surprising, DRAM and NAND memory giant Micron wasn’t immune to the selloff. MU stock fell largely in lockstep with the Nasdaq Tuesday.
Importantly though, Micron also has a reputation for marching to beat of its own drummer.
A Closer Look At MU Stock
While Micron is busy embracing risk for the first time in a long time after a terrific and record-breaking 2021, the bellwether is down 3% on the year. In fact, shares have been marching bearishly to their own drummer’s beat for months.
Since early April — nearly 6 months ago — Micron has been in a corrective cycle with August’s reaction low 29% removed from MU stock’s 52-week high. It gets worse, though, for many of MU’s shareholders.
Another miserable stat to gnaw on is that May’s relative high in Micron stock narrowly failed to eclipse the all-time-high it set back in 2000. It missed that mark by less than 1%.
Clearly Micron hasn’t exactly followed the bullish program so many of its peers have enjoyed this year. Heck it hasn’t exactly followed that program for the last couple decades for that matter.
Even worse (or so investors’ collective actions would have your believe), things just got a wee bit gloomier for Micron shareholders after the closing bell.
Shares of MU were off an additional 3% Tuesday night in afterhours trading following below-views Q1 sales guidance. This ultimately trumped substantial top- and bottom-line beats for its fourth-quarter on the back of pandemic-influenced prices for memory chips.
On conference call Micron’s CEO warned of modest declines in DRAM and NAND from very strong memory chip levels as PC customers adjust purchases due to non-memory component shortages.
But a forward-looking Wall Street apparently doesn’t like looking out too far.
Falling on deaf ears, reactionary fingers struck the sell button on MU stock. But there’s one thing many are overlooking. There’s a proffered rebound in 2022’s second half alongside estimated record revenues and solid profitability for the fiscal year.
MU Stock Monthly Price Chart
Source: Charts by TradingView
As gloomy as things may appear, there’s good news for Micron. It’s news that goes beyond today’s (and tomorrow’s) “end-of-days” anxiety. Specifically, the current bear cycle in MU stock is testing the first of two key layers of technical support defined by price, Fibonacci and trendline analysis dating back over the past several years.
At the moment, with shares near $70, MU is challenging its upper support zone, which spans from about $63 to $72.
An abnormally larger bear cycle would put Micron into a technical air pocket. If the end of days were to truly come into play, there’s a second deeper area of technical support from $51.50 to $56.
With shares having already corrected 29% and September coming off the calendar this week, my advice is to place MU stock on a watchlist for a nearby monthly buy signal.
Should Micron confirm September’s current inside doji candlestick next month in conjunction with a flattening or ideally, a bullish stochastics crossover, a classic bottoming purchase to complete MU’s bear market will be in play.
And if conditions do get a bit more ugly first for current MU shareholders? As I mentioned above, it’s not the end of days. Rather, it’s an even stronger invitation to become a Micron investor again (or for the first time)!
On the date of publication, Chris Tyler does not hold (either directly or indirectly) any positions in securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Chris Tyler is a former floor-based, derivatives market maker on the American and Pacific exchanges. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.
