Micron Technology Inc. (MU) disappointed investors with its latest quarterly numbers and the stock is indicated to open lower Wednesday morning. Unlike much of the stock market, which peaked in September, MU has been in a decline since the end of May. Prices are back down to a former resistance area from the middle of 2017 so we can at least ask the question whether prices have corrected enough. Let's check out the charts and indicators to see if they support that idea.
In the daily bar chart of MU, below, we can see that prices will be down around 50% from their May zenith when MU opens for trading Wednesday. The slopes of both the 50-day moving average line and the slower-to-react 200-day moving average line are bearish.
The daily On-Balance-Volume (OBV) line shows peaks in June and July and a decline to a late October low. The OBV line has crept a little higher from late October and may suggest that investors found the mid-$30s more attractive.
In the lower panel is the 12-day momentum study, which shows higher lows in momentum despite prices making lower lows. This difference is a bullish divergence and can at times foreshadow a rally.
In the weekly bar chart of MU, below, we can see that prices are below the declining 40-week moving average line. The $32-$27 area from 2017 could become support during this decline. We may get to see that idea in action Wednesday.
The weekly OBV line shows a long decline this year and tells us that sellers of MU have been more aggressive for months. The 12-week price momentum study at the bottom of the chart shows some slowing in the pace of the decline but not a good bullish divergence yet.
In this Point and Figure chart of MU, below, we can see a downside price target of around $31 being projected. Downside price targets in a bear market can get overrun so we will take this price objective with "a grain of sand" for now.
Bottom-line strategy: MU has endured a lengthy decline and is down to an area that may act as support. This is not enough to recommend a long position but it is enough to suggest covering shorts.