This Stock’s Next Bullish Trade Looks to Be Setting Up Very Soon

December 4, 2017
By

Shares of semiconductor stocks as a group suffered losses last week, with the VanEck Semiconductor ETF (NYSEARCA:SMH) dropping nearly 6% for its worst one-week slide in 2017 thus far.

Within this group shares of Micron Technology, Inc. (NASDAQ:MU) as a result have finally had a chance to work down the severe near-term overbought readings and are also arriving at a better technical area of support.

Traders and active investors would be wise to take note, for a next bullish trade looks to be setting up very soon.

The technology sector of the S&P 500 as a whole has performed notably well again in 2017, and within this sector semiconductors have showed outstanding performance.

The medium- and longer-term up-trends in this space remain well intact despite last week’s hiccup, which is to say that a buying opportunity should be just around the corner.

MU Stock Charts

Moving averages legend: red – 200 week, blue – 100 week, yellow – 50 week

On the multiyear weekly chart, we see that after a good rally in 2016 MU stock continued this ascent in 2017 and by September managed to break past its late 2014 highs around the $36 mark. Through this lens, what has been missing for me in order to add to long positions in MU stock is some sort of a re-test of this previous horizontal technical resistance area so as to prove its worth as technical support.

With last week’s drop, MU shares are now undergoing such a mean-reversion process which, however, could see lower prices still before a next rally.

Moving averages legend: red – 200 day, blue – 100 day, yellow – 50 day

On the daily chart, we see that MU stock last week fell back to the upper end of its up-trending channel and also managed to re-test its yellow 50-day simple moving average for the first time since the summer. From a momentum perspective MU stock could easily have more downside into the middle of this channel and toward its blue 100-day moving average in the $37 area, however given the stock’s popularity and the year-end dynamics of fund managers chasing stocks, it is possible that we see a next bullish reversal closer to the $40-$42 area.

Bullish reversals such as the one i am now waiting for by MU stock offer wonderful opportunities for traders and investors to put on income trades for monthly or quarterly income.

A bullish reversal for MU stock would now complete upon a significant 3% or more rally on a daily closing basis. If and when this takes place then the next upside target once again becomes the high $40s.

— Serge Berger

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Source: Investor Place



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