Micron Technology, Inc. (MU) shareholders have suffered via their fair proportion of ups and down over time, with this extremely cyclical inventory reacting to all types of short- and long-term catalysts. Fortunately, this bilateral footprint might break down in 2020, permitting a breakout above 2018 resistance within the mid-$60s. More importantly, that rally will open the door to an assault on the all-time excessive, posted on the top of the web bubble 20 years in the past.
The majority of chip shares look overextended and in want of a downturn following a dramatic uptrend that has lifted the PHLX Semiconductor Index (SOX) to an all-time excessive. However, Micron inventory usually goes its personal approach throughout broad-based declines, paying little consideration to the worth motion in different corners of the semiconductor universe. This tendency might come in useful in coming months, with the decade-long financial growth working into a number of headwinds.
MU Long-Term Chart (1990 – 2020)
The inventory accomplished a double backside reversal at a split-adjusted 70 cents in 1990, getting into a historic uptrend that stalled within the higher $40s in 1995. It mounted that resistance stage within the first quarter of 2000, lifting to an all-time excessive at $97.50 in July. Aggressive sellers took management when the web bubble burst, carving a five-wave decline that ended at a nine-year low within the single digits in February 2003.
The inventory acted poorly throughout the mid-decade bull market, initially stalling within the mid-teens within the first quarter of 2004. A 2006 breakout try failed, finishing a broad double prime, forward of a slow-motion decline that broke 2003 assist initially of 2008. Selling strain accelerated throughout the financial collapse, dumping Micron to the bottom low since 1992 in November.
That low marked the tip of the eight-year downtrend and a historic shopping for alternative, forward of a powerful bounce that reached 2004 resistance in 2013. Micron broke out into 2014 however failed the breakout one yr later, highlighting the inventory’s well-documented volatility. A secondary breakout in 2017 yielded a extra bullish end result, stalling within the low $60s in March 2018. Price motion has posted a rounded correction since that point, with the uptick now located inside 5 factors of resistance.
A Fibonacci grid stretched throughout the eight-year downtrend locations the 2018 excessive on the .618 sell-off retracement stage, whereas two declines have held assist on the rising 50-month exponential transferring common (EMA). The inventory reached harmonic resistance as soon as once more in January 2020 and has held up remarkably properly regardless of the coronavirus outbreak, which is important due to Micron’s huge China and Asia publicity.
The month-to-month stochastic oscillator entered a fancy purchase cycle in January 2019 that hasn’t crossed into the overbought zone but. This is fortuitous positioning as a result of the strongest upside within the cycle usually unfolds on the identical time the indicator enters this lofty territory. Taken along with value motion on the .618 retracement, the inventory ought to entice the shopping for energy wanted to break this resistance and head for the .786 retracement within the higher $70s.
MU Short-Term Chart (2018 – 2020)
Buying energy has saved up with value improvement for the reason that final main decline bottomed out in December 2018, with the on-balance quantity (OBV) accumulation-distribution indicator now inside a stone’s throw of the prior peak. Meanwhile, a Fibonacci grid stretched throughout the 21-month correction locations 2020 value motion on the .786 sell-off retracement stage, which marks the ultimate barrier prior to a 100% retracement into the prior excessive.
This check seems incomplete due to Wednesday’s capturing star candlestick on the January excessive, suggesting that the inventory will head into one other check at 50-day EMA assist close to $55. With a bit luck, a dip into the Feb. four hole between $54 and $55 will mark a low-risk shopping for alternative, forward of a breakout that enables the inventory to clear 2018 resistance and take the following step on its multi-decade journey again to the 2000 peak.
The Bottom Line
Micron Technology inventory has shaken off virus headwinds and will get away quickly, probably heading into the higher $70s.
Disclosure: The creator held no positions within the aforementioned securities on the time of publication.