Thinking of Buying Micron? Check Out the Charts First

Micron is struggling on Friday with many other chip stocks. Here's how to trade the stock as it churns below key resistance.
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Micron  (MU) - Get Report is getting hit on Friday, down more than 3% on escalating trade tensions between the U.S. and China.

There’s been a lot of news to dig through over the last 24 hours. In late-Thursday trading action, news surfaced that Taiwan Semiconductor  (TSM) - Get Report was considering a U.S. production location.

That sent the semiconductor space higher. However, U.S. restrictions on Huawei suddenly landed the group in the crosshairs of a potentially escalating trade situation on Friday. It’s weighing on stocks like Broadcom  (AVGO) - Get Report, Apple  (AAPL) - Get Report and Applied Materials  (AMAT) - Get Report, among others.

That includes Micron. Let’s have a look at the charts.

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Trading Micron Stock

Daily chart of Micron stock.

Daily chart of Micron stock.

Sloppy. That’s the first word that comes to my mind when I look at the chart for Micron stock.

Shares were hammered in February and March, sliding about 50% from peak to trough. The rebound has been robust though, with shares climbing more than 40% to current levels.

However, Micron is clearly struggling with resistance. That comes into play from three notable marks. The first is the 200-day moving average, which failed as support in March and has rejected Micron three times now on the rebound.

Second is the $50 level, which has been a key mark over the past several quarters and also sits near the 61.8% retracement. Lastly, the prior uptrend mark (blue line) has been acting as resistance as well, also rejecting Micron stock three times.

Here's what bulls really need to see. In order for the stock to get some wind in its sails, Micron needs to close above $50. While that still leaves it below its prior uptrend, I view clearing the other obstacles as quite meaningful.

A close above $50.14 will also put Micron above last month’s high, allowing for a potentially larger rotation to take place. In that event, it could put the 78.6% retracement near $54.75 in play.

A break below $42 gets momentum in the opposite direction going. That will drop Micron stock below the 38.2% retracement and leave it below its 20-day and 50-day moving averages as well.

At the very least, it puts the April low at $39.33 in play, followed by the 23.6% retracement near $38.