How to Trade Micron When It Reports Earnings

Micron isn't breaking down, but it's not trading with resilience ahead of its third-quarter results. Let's look at the charts for the stock before earnings.
Author:
Updated:
Original:

Volatility has been picking up lately, which makes it a tough time for Micron  (MU) - Get Report to report earnings. However, that’s exactly what it will do after the close of trading on Monday.

Micron will report its fiscal third-quarter results at a very difficult time. Just look at how Nike  (NKE) - Get Report did, a premier apparel company that reported a surprise loss and missed revenue estimates by almost $1 billion.

Granted, Micron isn’t an apparel company, but investors should know the last few months haven’t been a cakewalk for most businesses.

There are concerns about Intel’s  (INTC) - Get Report second-half headwinds, while Advanced Micro Devices  (AMD) - Get Report lowered its full-year outlook due to coronavirus concerns in the second half 2020.

That said, Micron did recently bump up its outlook

What Micron has to say is going to be very critical for Wall Street. If they hear that demand is recovering swiftly and should remain that way going forward, then it could be a major catalyst for Micron and the chipmakers.

However, a downbeat outlook could cast a shadow over the group. Let’s look at the charts to see how Micron is shaping up ahead of the quarter.

Trading Micron Stock

Daily chart of Micron stock.

The daily chart of Micron stock.

Earlier this month, Micron stock briefly reclaimed the $50 mark and ran toward $55. There it found resistance at the 78.6% retracement and failed to sustain its pop.

While shares did reclaim $50 after another brief rally, it notched a lower high, failing to hold over $52. This allowed a downtrend resistance mark to form (blue line).

Truth be told, the charts are pretty sloppy ahead of earrings. Micron trades around a cluster of moving averages, as it hovers notably below the recent high but well off the lows.

I would love to see some clarity on the charts and observe how Micron closes after the results are out. In that event, I am looking for a break in the current range.

On the upside, that means clearing $50, as well as the 20-day and 200-day moving averages. Over $52 puts Micron stock over downtrend resistance and puts a retest of the 78.6% retracement near $55 back in play.

Should shares decline instead, look for a close below the 50-day moving average and 50% retracement near $46. Below these marks and the $42 to $43 area is in play (the 38.2% retracement), followed by a possible gap-fill down toward $38.

Remember, we are reacting, not predicting, when it comes to trading Micron stock and its earnings.