Why Micron Technology Stock Is Vulnerable

Micron Technology

MU
is suffering from a death cross formation that was confirmed on Thursday, August 12. Now that its 50-day simple moving average is below its 200-day simple moving average the downside risk is significant.

The stock is below its quarterly, semiannual and annual pivots at $88.19, $79.17 and $75.84. This weakness occurred after Micron set its all-time intraday high of $96.96 on April 4, 2021. This high is just pennies above its high set in the year 2000.

Micron is down 5.7% from Friday’s close of $70.86. This is 26.9% below the April 4 high. The stock is still 127.6% above its March 18, 2020, low of $31.13.

The semiconductor stock has a p/e ratio of 16.05%, and the company does not offer a dividend. Micron beat earnings-per-share estimates in six consecutive quarters, including its last report stated on June 30.

The Daily Chart for Micron

The daily chart for Micron shows the formation of a golden cross confirmed on November 3, 2020. This occurred when the 50-day simple moving average rose above the 200-day simple moving average. This signal began the momentum runup from the November 3 price at $51.08 to the all-time intraday high of $96.96 set on April 12.

The stock has mostly been below its 50-day SMA since April 19 with this average now down to $78.40. The 200-day SMA was a magnet between July 16 and August 2. The downside break for Micron occurred after a downgrade by Morgan Stanley from overweight to equal weight. This downgrade caused shares of Micron to fall below its semiannual and annual pivots at $79.17 and $75.84, respectively, which are the two lower horizontal lines in the chart. This caused the formation of the death cross on August 12.

The Weekly Chart for Micron

The weekly chart for Micron was positive until the Morgan Stanley downgrade. The chart will be negative next week given a close this Friday below its five-week modified moving average at $76.31. The stock is well above its 200-week simple moving average or reversion to the mean at $53.08. The 12x3x3 weekly slow stochastic reading is declining at 51.36.

Trading Strategy: Buy Micron on weakness to its 200-week simple moving average at $53.08. Reduce holdings on strength to its annual and semiannual pivots at 75.84 and $79.17.

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