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Micron Sets 2019 High on Memory Chip Demand: How to Trade It Now

Micron has become a pure play on upward technical momentum. It's time to employ a sell stop to lock in gains as the stock stretches to new 2019 highs.

Micron Technology  (MU) - Get Micron Technology Inc. Report was rising Thursday after the Boise Idaho-based semiconductor company opined that demand for memory chips has bottomed. 

The stock opened with a fresh 2019 high Thursday morning and momentum remains strong as the stock stays above its weekly pivot at $53.20. The stock has become a pure play on momentum, so my strategy is to set a sell stop to lock in gains.

This stock is a popular trading vehicle and has had significant periods of up and down volatility during the decade that’s about to end. 

The stock closed Wednesday at $53.04, up 67.2% year to date and in bull market territory 86.8% above its Dec. 26 intraday low of $28.39. But there’s more to this story.

First of all, shares of Micron set an all-time intraday high of $97.50 in July 2000, during the dot-com bubble. The stock subsequently traded as low as $1.59 in November 2008, following the financial crisis. 

At the low, Micron was a buy using my guideline as being an “option on survival” in which you buy a stock between $1 and $3 a share with funds you can afford to lose.

Looking at the decade about to end, Micron traded as high as $36.59 in December 2014 then plunged 74% to $9.35 in May 2016.

The stock then rallied nearly seven-fold to its multiyear intraday high of $64.66 set in June 2018.

The latest bear market for Micron was the decline of 56% from this high to the Dec. 26, 2018, low of $28.39.

Wall Street and financial media are fixated on touting a multiyear bull market. But when you look at stock-specific volatility there have been several bull and bear markets. 

They ignore the importance of intraday highs and lows as they talk about the outdated use of only closing highs and lows. They say that the stock market lows of a year ago were on Christmas Eve. They miss the fact that the intraday lows for most of the averages and stocks occurred on Dec. 26.

Follow my algorithms and capture the trading opportunities!

The Daily Chart for Micron

Micron from the Dec.26 'key reversal' buy to today's momentum continuation.

Micron from the Dec.26 'key reversal' buy to today's momentum continuation.

Courtesy of Refinitiv XENITH

Look at the lower left corner of the daily chart. Shares of Micron had a bullish “key reversal” day on Dec. 26. The stock traded as low as $28.39 that day and closed the day at $30.89. This close was above the high of $30.35 on Dec. 24 confirming a bullish daily “key reversal.”

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The stock ended 2018 at $31.73 which was an important input to my proprietary analytics and an annual risky level formed at $38.66 for all of 2019. This was the original upside target which was tested on Jan. 25. Note that $38.66 became an annual pivot between Jan. 25 through June 28. It then became a value level at which to buy.

The close of $38.59 on June 28 was another important input to my analytics. The semiannual risky level for the second half of 2019 was first tested at $43.86 on July 10. This level became a semiannual pivot which was a magnet until a breakout above it occurred on Aug. 29.

The close of $42.85 on Sep. 30 was an input that resulted in a quarterly pivot at $46.95 which became a magnet between Oct. 24 and Dec. 10 and was the launching point for the current momentum run.

The close of $47.51 on Nov. 29 was an input that resulted in its monthly value level for December. This level was tested as a “buy on weakness” on Dec. 3. This week’s pivot is $53.20.

When a stock moves above all key levels, upward momentum accelerates. This is when traders should employ a sell stop to lock in gains or to limit losses.

The Weekly Chart for Micron

Micron has had bull and bear moves in the decade that will end this month.

Micron has had bull and bear moves in the decade that will end this month.

Courtesy of Refinitiv XENITH

The chart is positive with the stock above its five-week modified moving average of $49.23 and well above its 200-week simple moving average or “reversion to the mean” at $34.77. Note that this key average was tested at the Dec. 26 low of $28.39 when the average was $28.88. This was a major buying opportunity.

The 12x3x3 weekly slow stochastic reading is projected to rise to 68.75 this week up from 61.13 on Dec. 13.

How to use my value levels and risky levels:

Trading Strategy: I do not have a nearby level at which to buy. If you are trading the upward momentum employ a sell stop to lock in gains. 

Value levels and risky levels are based upon the last nine monthly, quarterly, semiannual and annual closes. The first set of levels was based upon the closes on Dec. 31, 2018. The original annual level remains in play.

The close at the end of June 2019 established new monthly, quarterly and semiannual levels. The semiannual level for the second half of 2019 remains in play.

The quarterly level changes after the end of each quarter so the close on Sep. 30 established the level for the fourth quarter.

The close on Nov. 29 established the monthly level for December.

My theory is that nine years of volatility between closes are enough to assume that all possible bullish or bearish events for the stock are factored in.

To capture share price volatility investors should buy on weakness to a value level and reduce holdings on strength to a risky level. A pivot is a value level or risky level that was violated within its time horizon. Pivots act as magnets that have a high probability of being tested again before its time horizon expires.