Shares of semiconductor stocks as a group have been hit notably over the past two weeks. While anything is possible into quarter end this Friday, a stock like that of Micron Technology (NASDAQ:MU) now looks to point lower yet through a multiweek lens. Active investors and traders can set up trades to position for more downside in MU stock.
For some perspective and to reiterate something I have highlighted for multiple quarters now, large-cap technology stocks in good part have kept the U.S. stock market afloat. Within this sector, the semiconductor stocks play an important part, and the recent weakness in this group now flashes a broader market warning signal.
More specifically as it pertains to Micron Technology, all the indications we are getting from client discussions and sentiment analysis points to MU stock being a momentum chaser’s favorite play.
While I am not here to argue against the fundamentals for Micron Technology as a longer-term holding, many immediate gratification traders often gravitate toward this name for a quick buck. As such, once the tide turns for a name like this, it can easily overshoot on the downside.
MU Stock Charts
Moving averages legend: red – 200 week, blue – 100 week, yellow – 50 week
For some perspective, let’s understand the bigger-picture multiyear weekly chart. Here we see that after a steep blow-off rally into early March of this year the stock quickly plunged to the lower end of its trading range (black parallels). From there it quickly rebounded, only to form a double top by the second half of May.
The stock is now once again on its way toward the lower end of this trading range, and from where I sit it now stands a decent chance of undershooting this range, i.e. work its way toward the yellow 50 week simple moving average through a multi-week/month lens.
Moving averages legend: red – 200 day, blue – 100 day, yellow – 50 day
On the daily chart we see that MU stock took a leg lower by way of a down-gap a few days following its June 20 earnings report. The stock then found immediate-term support at its blue 100-day moving average where it now looks to break through and head lower toward the red 200-day moving average.
Again, while anything is possible into quarter end this Friday June 29th MU stock continues to look heavy and points lower from this angle.
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