Micron Beats on Earnings but Stock Lags Key Levels – Here's the Trade

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Micron is above its weekly pivot at $41.06 but below its 200-day simple moving average at $47.45 and its quarterly pivot at $50.41. This will be the short-term trading range.

Micron Technology  (MU) – Get Report beat earnings estimates and raised its third-quarter guidance – and the stock stayed below key levels, creating a trading opportunity.

The stock opened above its weekly pivot at $41.06 but it stayed below its 200-day simple moving average at $47.45 and its quarterly pivot at $50.41. This should be the short-term trading range.

Micron, Boise, Idaho, focuses on memory and storage components. Here’s the coverage reported by TheStreet.com which includes Wall Street upgrades for the stock.

At $45.22 the stock is down 16% year to date and in bear-market territory 26% below its multiyear intraday high of $61.19 set on Feb. 12. 

The stock is also in bull-market territory, 46% above its March 18 low of $31.13.

The stock has a favorable p/e multiple at 12 but does not pay a dividend, according to Macrotrends.

Micron set its all-time intraday high of $97.50 in July 2000, during the dot.com bubble. 

The stock subsequently traded as low as $1.59 in November 2008, following the crash of that year. 

At the low, Micron was a buy using my guideline as being an option on survival. That’s where you buy a stock trading at $1 to $3 a share with funds you can afford to lose.

Here’s how to trade it now based on its daily and weekly charts and levels from my proprietary analytics.

The Daily Chart for Micron

Daily Chart For Micron Tech

Courtesy of Refinitiv XENITH

The daily chart for Micron had been above a golden cross since Aug. 2. This occurs when the 50-day simple moving average rises above the 200-day simple moving average, indicating that higher prices will follow. 

This buy signal tracked the stock to its multiyear intraday high of $61.19, set on Feb. 12. 

This signal ended on March 11 with a gap open below its 200-day simple moving average now at $47.45.

The stock traded above its annual pivot at $55.84 on Jan. 7, then extended its gains to its 2020 high of $61.16. This high was an opportunity to book profits at its semiannual risky level of $60.72. 

The stock gapped below its annual pivot at $55.84 on Feb. 24.

The stock is below its monthly risky level for March at $59.20 and gapped below its quarterly value level at $50.41 on March 9.

After Micron beat earnings estimates, the stock opened above its weekly pivot at $41.06 and is now attempting to rebound to its 200-day SMA at $47.45 and to its quarterly pivot at $50.41.

The Weekly Chart for Micron

Weekly Chart For Micron Tech

Courtesy of Refinitiv XENITH

The weekly chart for Micron remains negative, given a close on Friday below its five-week modified moving average at $48.10.

The stock was below its 200-week simple moving average, or reversion to the mean, last week with the average at $37.68. 

Note the buying opportunity from this moving average during the last week of 2018.

The 12x3x3 weekly slow stochastic reading is projected to decline to 37.52 this week from 42.1 on March 20. 

The stock was overbought with a reading above 80 during the week of Jan. 24.

Trading Strategy: Buy weakness to the weekly value level at $41.06 and reduce holdings on strength to the quarterly and annual pivots at $50.41 and $55.84, respectively.

How to use my value levels and risky levels:

The closes on Dec. 31, 2019 were inputs to my proprietary analytics. Quarterly, semiannual and annual levels remain on the charts. Each uses the last nine closes in these time horizons.

Monthly levels for March were established based upon the February 28 closes.

New weekly levels are calculated after the end of each week.

New quarterly levels occur at the end of each quarter. Semiannual levels are updated at mid-year. Annual levels are in play all year long.

My theory is that nine years of volatility between closes are enough to assume that all possible bullish or bearish events for the stock are factored in.

To capture share price volatility investors should buy on weakness to a value level and reduce holdings on strength to a risky level. A pivot is a value level or risky level that was violated within its time horizon. Pivots act as magnets that have a high probability of being tested again before its time horizon expires.

How to use 12x3x3 Weekly Slow Stochastic Readings:

My choice of using 12x3x3 weekly slow stochastic readings was based upon back-testing many methods of reading share-price momentum with the objective of finding the combination that resulted in the fewest false signals. I did this following the stock market crash of 1987, so I have been happy with the results for more than 30 years.

The stochastic reading covers the last 12 weeks of highs, lows and closes for the stock. There is a raw calculation of the differences between the highest high and lowest low versus the closes. These levels are modified to a fast reading and a slow reading and I found that the slow reading worked the best.

The stochastic reading scales between 00.00 and 100.00 with readings above 80.00 considered overbought and readings below 20.00 considered oversold.

A reading above 90.00 is considered an “inflating parabolic bubble” formation that is typically followed by a decline of 10% to 20% over the next three to five months.

A reading below 10.00 is considered as being “too cheap to ignore” which typically is followed by gains of 10% to 20% over the next three to five months.

Disclosure: The author has no positions in any stocks mentioned and no plans to initiate any positions within the next 72 hours.