Micron Technology Inc. (MU) is indicated to open sharply lower this Friday morning. Is this weakness a sign of more to come or a retest of the early September low?
I last wrote about MU in early July, writing that, "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." Let's dig into the latest charts and indicators, for this stock discussed by Jim Cramer Friday on Real Money.
In the daily bar chart of MU, below, we can see how MU weakened from July to a lower low in August and the breaking of the cresting 200-day moving average line. The decline picked up speed on the downside this month with a lower low and test of key support around $40. The 50-day moving average line is now close to crossing below the 200-day line for what is commonly called a "dead cross." This moving average crossover is considered bearish but you can see that it comes well off the highs.
Trading volume increased in September as prices made new lows for the move down. The daily On-Balance-Volume (OBV) line has not weakened much since June and this suggests that sellers of MU have not been aggressive the past four months.
In the lower panel is the 12-day price momentum study, which has yet to show a bullish divergence. A bullish divergence would tell us that the pace of the decline had slowed and we could anticipate some price strength ahead.
In the weekly bar chart of MU, below, we can see the rise and decline over the past three years. Prices stayed above the rising 40-week moving average until July/August and now the slope of the line is flat.
The weekly OBV line shows weakness since March and is more bearish than the daily OBV line. From November to March to July the 12-week price momentum study in the bottom panel shows that momentum has weakened -- typical at a top.
In this Point and Figure chart of MU, below, we can see that prices have met a downside price target of $50 and that a decline to $40 would be a downside breakout. The volume at price data (left scale) suggests that there is good support for MU in the low $40s. A break of $37 would be very bearish, in my opinion.
Bottom-line strategy: If MU can hold above the early September low near $40 then prices could rebase and perhaps try the upside in a few months. If MU makes a new low close for the move down it tells us that the bear is still in control and $30 could be the risk on the downside.