Micron Technology, Inc.: Has Micron Stock Finally Bottomed?

Micron TechnologyMicron stock: An Opportunity?

Have you ever wished you had the opportunity to buy a beaten down stock right before it turns and heads higher? Micron Technology, Inc. (NASDAQ:MU) stock may just be that perfect opportunity.

Shares of Micron stock have suffered a painful return since peaking on December 5, 2014, falling from a closing high of $36.49 to a closing low of $9.56—a 73.8% loss. I could delve into the fundamental reasons that caused the stock to plummet, but that is not my objective here.

Instead, I want to find a systematic approach that can help investors avoid losses and harness gains. Technical indicators and chart patterns can provide investors that edge.

Then: Bearish Signals

There were technical signals that gave warning to an imminent decline, meaning the painful drop in share price could have been avoided.

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Micron Technology, Inc. NASDAQ Chart

Chart courtesy of www.StockCharts.com

There were three distinct bearish signals:

  1. On January 14, 2015, shares of Micron stock traded below the 200-day moving average (red line on the chart above) and failed to successfully trade back above it. The 200-day moving average is the perceived defining line that separates stocks into bullish and bearish trends.
  2. On February 26, 2015, MU stock generated a death cross. A death cross is a bearish signal that is produced when a faster moving average (50-day moving average) crosses below a slower moving average (200-day moving average). Traders use this signal to confirm a bear market is on the horizon.
  3. On June 15, 2015, Micron stock confirmed a head-and-shoulder top. A head-and-shoulder top forms at the end of an uptrend and its completion confirms that the trend in the share price has reversed to the downside.

So, that’s not one or two—but three bearish warning signals. Anyone following signals could have helped investors avoid the plummet in MU stock’s share price and the nearly 74% loss. As each subsequent signal mounted, the trend was further embedded and the decline increased in severity.

Now: Bullish Signals

Now, many of the same indicators that warned us of an impeding share collapse then are currently flashing signals that a trend reversal is in the making.

Micron Technology, Inc. NASDAQ

Chart courtesy of www.StockCharts.com

There are three current bullish trend reversal signals:

  1. On June 1, 2016, shares of Micron confirmed a double bottom. A double bottom forms at the end of a downtrend and its completion confirms that the trend in the share price has reversed to the upside.
  2. On July 11, 2016, shares of Micron stock closed above the 200-day moving average and they remain above it. This signals that those shares are trading in a bullish trend.
  3. Currently, the moving averages are converging. If shares continue to trade above the 200-day moving average, a golden cross will generate. A golden cross is a bullish signal that is produced when a faster moving average—the 50-day moving average—crosses below a slower moving average—the 200-day moving average. Traders use this signal to confirm a bull market is on the way.

These technical indicators and patterns are lining up and present an excellent argument that a bull market is on the horizon. Micron stock is attractive at its current levels. As each indicator generates a bullish signal, I expect the rate of ascent for MU stock’s price to increase.

The Bottom Line on Micron Stock

A systematic approach to investing would have helped investors avoid losses when shares of Micron stock plummeted. The same signals that were warning of an impeding decline then are now signaling a change in trend. Shares of MU stock could be presenting investors with an opportunity to buy shares that have bottomed—an opportunity some can only wish for. For this reason, Micron stock is at least worth a closer look.