Shares of semiconductor maker Micron Technology (MU) slipped to $34.14 at Tuesday’s close. Then the company solidly beat analysts’ earnings estimates, but after-hours volatility was muted. The stock traded as high as $35.90, staying below its high of $36.60 set on Sept. 20. Here’s how to trade the stock.
Micron has been a popular investment and trading stock since trading as low as $9.31 during the week of Jan. 22, 2016. The Sept. 20 high was a re-test of its multiyear intraday high of $36.59 set during the week of Dec. 12, 2014.
Between December 2014 and January 2016, the stock plunged by 75% which makes Fibonacci Retracement levels from the high to the low important to track now that Micron reported its quarterly results.
Weekly Chart for Micron
Courtesy of MetaStock Xenith
Micron has a positive but overbought weekly chart with the stock above its five-week modified moving average (in red) of $32.79. The stock is well above its 200-week simple moving average or “reversion to the mean” (in green) at $23.16, last tested during the week of Dec. 16 when the average was $20.18.
The “reversion to the mean” is an investment theory that the price of a stock will eventually return to a longer-term simple moving average, and the 200-week is simple to track. A ticker trading above its “reversion to the mean” will eventually decline back to it on weakness. Similarly, a ticker trading below its “reversion to the mean” will eventually rebound to it on strength.
The 12x3x3 weekly slow stochastic reading is projected to end this week at 82.42 moving above the overbought threshold of 80.00.
The horizontal lines are the Fibonacci Retracement levels of the 75% decline from December 2014 high to the January 2016 low. Failure to hold its five-week modified moving average of $32.79 indicates risk to the 61.8% retracement of $26.18. A new high above $36.60 will be difficult to sustain given my semiannual pivot at $35.26.
Investment Strategy: Buy weakness to my annual pivot of $29.80, which has been a magnet since the week of March 24, last crossed during the week of Sept. 1. Given a new high, investors should reduce holdings on strength to my monthly risky level of $39.25.