Micron Stock Is Testing a Very Important Level of Price Resistance

micron stock
Credit:iStock.com/denphumi

MU Stock: This Is All That Stands in the Way of Higher Stock Prices

Micron Technology, Inc. (NASDAQ: MU) stock reported earnings after the close of trade on September 26, 2017. It beat on both the top and bottom lines and any concerns that investors had regarding this company were quickly alleviated as the guidance going forward looks solid. This news delighted investors. In response, they bid Micron stock higher by 8.5%.

I am focusing on the stock price at the moment because MU stock is in the process of testing a key level of price resistance that sits just overhead. I outlined this level of price resistance in a report titled “Micron Stock Has Room to Run,” which published on June 8, 2017. In that report, I provided a number of developments on the company’s stock chart that were suggesting that higher stock prices were likely to follow, with the caveat that this move towards higher stock prices was likely to be capped by this significant level of price resistance.

Before I delve into the stock chart, it is worth noting to anyone who has not frequented my works that I generate my views on an investment by analyzing the company’s stock chart. This method of investment analysis is called technical analysis and it is predicated on the notion that historical price and volume data points can be used to project where a stock’s price is heading next.

I have spent nearly two decades studying and applying this method to my trading strategies. Like all methods, this one is not perfect. But when it is applied correctly using appropriate risk parameters, the results are simply outstanding.

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The following stock chart illustrates the level of resistance that MU stock is currently testing and the influential momentum indicator that was instrumental in suggesting that higher stock prices were in development.

MU Stock chart

Chart courtesy of StockCharts.com

This stock chart illustrates the significant level of price resistance that Micron stock is currently testing. This level of overhead resistance sits at $36.60 and it was established in 2014. Shortly after this level of price resistance was established, a correction ensued. MU stock went on to drop by 66% before this investment was finally able to find its footing. The size and scope of this correction is a testament to the significance of this level of price resistance.

Micron returned to test this level of price resistance on September 20, which was in line with my prediction that was laid out in my previous report.

The reaction following earnings will result in another test of this level, and at this moment, this level of price resistance is all that stands in the way of higher Micron stock prices.

The indicator located in the lower panel labeled MACD has been instrumental in suggesting that MU stock was set to appreciate. MACD is an acronym for moving average convergence/divergence and this indicator is used to distinguish between bullish and bearish momentum. Momentum influences the trading action in a stock, and therefore it is important to determine whether bullish or bearish momentum is influencing the stock price.

In February 2015, a bearish MACD cross was generated, indicating that bearish momentum was influencing the trading action in MU stock, which created a path of least resistance that was geared towards lower stock prices. This indication correctly confirmed the notion that lower prices were on the horizon.

In September 2016, a bullish MACD cross was generated, indicating that bullish momentum was influencing the trading action in Micron stock, which created a path of least resistance that is geared towards higher stock prices. Once again, this indication correctly confirmed that higher stock prices were on the horizon.

The MACD indicator is currently in bullish alignment, which continues to support the notion that higher stock prices are on the horizon. Price resistance currently sits at $36.60, and I would use a confirmed close above $37.00 to verify that resistance has been broken. A confirmed close involves two consecutive closes above $37.00.

Analyst Take: 

Micron stock reported earnings on September 26, which caused the stock price to appreciate in after-hours trading, setting the stage to test a very important and influential level of price resistance. This level of price resistance is all that stands in the way of MU stock and higher stock prices. A confirmed close above $37.00 would suggest that higher prices are on the horizon.