We're in a quiet stretch of earnings, but there's some notable names reporting this week. Among them is Micron (MU - Get Report) , a controversial name given its wildly fluctuating top and bottom line.
Micron operates in a boom-bust environment. When DRAM and NAND markets have high demand and tight supply, earnings and revenue rip higher. When the effects last for several quarters or years, investors can see enormous returns.
For instance, three years ago, Micron stock was trading for less than $12 per share. A year later, it was near $30, and less than two years later it was near $65. From peak to trough, that's more than a five-fold return in less than 24 months.
But as the market gives, it also takes. While Micron stock is actually up about 6% so far in 2019, it's down more than 40% over the past 12 months. Numerous analysts have warned about the company's upcoming report and believe that the second-half turnaround is now further away than previously thought.
For the current quarter, estimates call for a near-74% decline in earnings to 83 cents per share. That's on a near-40% decline in revenue to $4.77 billion.
At the end of the day, it won't be the results that matter, though. It will be what management has to say about its second-half outlook for 2019. If the recovery in NAND, and in particular DRAM, is delayed, then the stock could again come under pressure.
Trading Micron Stock on Earnings
What makes Micron stock tough? It's not whether the report will be good or bad, as we already know it will be bad based on the estimates. The question is whether investors have priced in enough disappointment or if more losses are on the way.
As you can see on the daily chart above, $32 has been buoying Micron stock and shares have been trading OK over the past few sessions. That said, it's putting in a series of lower highs in the short term and is having trouble closing above its 20-day moving average. That doesn't exactly scream strength from a trading perspective.
Unfortunately for bulls, neither does the weekly chart, as see below.
Between $35 and $36 has proven to be a notable range over the past six years, so Micron stock finding this level to be resistance over the past few months is discouraging. So is its inability to get above its 10-week moving average. That said, $32 has been holding as support, while the 200-week moving average isn't all that far away.
Remember, we're mapping out some key potential levels for MU stock in a post-earnings scenario, not from a pre-earnings setup.
On the downside, I'm watching the 200-week moving average at $30.78 and the 2018 lows at $28.39. I want to know if these level will give way or draw in buyers of Micron stock on a decline.
On the upside, I'm watching the 10-week moving average at $35.45, and the 50-day to 200-day moving average range, between $37.24 and $38.72. Can Micron stock reclaim these levels and turn higher or will a rally to these marks act as resistance and draw in sellers?
We'll find out soon enough.
Save 57% with our July 4th Sale. Join Jim Cramer's Action Alerts PLUS investment club to become a smarter investor! Click here to sign up!