Micron Technology Inc. (MU) is looking like it can bounce higher Thursday morning. While a higher open would be comforting to recent longs that may not be enough to overcome some bearish signals that have developed on the charts in recent weeks. Let's drill down into the charts and indicators to see what we should watch for in the short to intermediate-term.
In the daily bar chart of MU, below, we can see that prices have declined through June and right into July 3. Longs did not have a lot to celebrate on Independence Day. Reading the chart from right to left we can see a slightly higher peak in late May versus March. The volume of trading in May was lighter than in March, which suggests that traders were not being as aggressive despite the new highs.
Last month prices gapped lower to break the flat 50-day moving average line. As of Tuesday prices were pretty close to the rising 200-day moving average line. A similar positioning can be seen in early May and back in February and both times the stock rallied.
While the level of volume was less at the end of May the daily On-Balance-Volume (OBV) line did not peak until early June and has only declined slightly, which suggests that MU is falling more of its own weight than aggressive selling. There was a bearish divergence from March to May with the 12-day momentum study and that, with the benefit of hindsight, may have been the subtle clue signaling the June correction.
In the weekly bar chart of MU, below, we have mixed technical signals. Prices are above the rising 40-week moving average line, which has been bullish since the middle of 2016. The weekly OBV line shows a peak in March and lower peak in May suggesting that buyers were less aggressive in May.
In the lower panel is the 12-week price momentum study, which shows a lower peaks in March and May than the prior November. This is a bearish divergence when compared to the price action showing higher highs. The rally has been slowing.
In this Point and Figure chart of MU, below, we can see a pattern of distribution (selling) and tentative downside price target of $41.
Bottom line: MU has made a significant advance from its lows back in 2016 around $10. Bearish divergences between momentum and the price action and the weekly OBV line suggest the potential for a shift if not a reversal. A couple of closes back above $55 will improve the short-term picture so that longs can exhale. A close above $65 will put the bulls in control again with an $80 price target.