MU Stock: Technically Aligned for Further Gains
Volatility is back, and its first appearance after a long hiatus involved a sell-off that sent chills down the spines of investors. In early February, the markets finally found their footing after a 10% correction ran its course. Although higher prices have since prevailed, the markets continued to swing both ways in large increments.
These swings can become unnerving for investors and, as a result, when volatility is high, I recommend investing in the best-of-breed stocks that are leading the pack. Which brings us to the reason why I am currently focusing on Micron Technology, Inc. (NASDAQ:MU) stock.
Micron stock is one of the names that is currently leading the pack higher, and I have reason to believe that its leadership will persist and that higher MU stock prices are on the horizon.
As is always the case, my views are all technical in nature, and the constructive price action highlighted on the following Micron stock chart is why I believe that the recent ascent toward higher MU stock prices is likely to continue.
Chart courtesy of StockCharts.com
The MU stock chart has been annotated to highlight constructive price action and an influential momentum indicator, which has been responsible for creating and sustaining the bullish trend in Micron stock.
Constructive price action contains two predominant waves: an impulse wave and a consolidation wave.
The wave highlighted in the green is an impulse wave and it defines the period in a bullish trend when the stock price sustains an uninterrupted move toward higher prices.
The wave highlighted in purple is a consolidation wave and it defines the period in a bullish trend when the stock price corrects and refrains from advancing. Consolidation waves are a very important part of a bullish trend because they create the necessary conditions for the stock price to sustain another advance via an impulse wave.
Impulse waves and consolidation waves feed off each other in order to create and sustain a bullish trend.
Micron stock has just completed a consolidation wave, and this feat suggests that a new advancing impulse wave is now in development and that, therefore, higher stock prices are likely to prevail. This notion of higher prices will be reinforced by a bullish MACD cross.
MACD is a momentum indicator that distinguishes between bullish and bearish momentum. This indicator is very significant and influential because a stock cannot sustain a move in either direction unless the applicable momentum supports it.
A bullish MACD cross in September 2017 correctly confirmed that an impulse wave was in development, while a bearish MACD cross in December 2017 correctly confirmed that a consolidation wave was in development. This is pertinent information because the MACD signal lines are currently converging and a bullish MACD cross could be generated in the coming days, which will reinforce the notion that higher MU stock prices are in development.
If I take a step back and look at the price action from a longer-term perspective, this notion of higher MU stock prices is magnified by a considerable amount.
The following Micron stock chart illustrates the technical developments that are reinforcing the notion that much higher MU stock prices are on the horizon.
Chart courtesy of StockCharts.com
In September 2017, MU stock broke above a long-standing high that was created in November 2014. After this long-standing high was established, a significant sell-off followed, and it has taken three years’ time to return and break above this significant price point.
The price action within the consolidation wave that was just completed tested this significant price point from above. This price action is called a “backtest” and it serves to reaffirm that the break above this significant price point was legitimate while simultaneously establishing this price point as a new level of price support. Successful backtests act like springboards and, once they are complete, higher stock prices usually prevail.
A completed backtest, the constructive price action, and a bullish MACD cross would all be implying that higher Micron stock prices were on the horizon. The all-time high resides at $97.50 and was established in July 2000. This is the price objective that I believe Micron stock is heading toward.
A number of technical indications on the Micron stock chart are suggesting that MU stock is poised for further gains. As a result, a bullish outlook on this investment is warranted, and I will maintain this view until there are technical indications that suggest otherwise.