Micron Technology (MU) - Get Report was trading below its monthly pivot at $50.30 before reporting earnings after the closing bell on Thursday, Sept. 26. The memory semiconductor maker reported a solid quarter, but shares slumped on disappointing guidance. My call is to buy weakness to its semiannual pivot at $43.86 and sell strength to monthly and quarterly risky levels at $50.30 and $54.70 if the stock rebounds into quarter end.
Here's TheStreet.com commentary on the earnings report released after the close on Sept. 26. The technical warning is that the stock was below its monthly pivot at $50.30 at the 4 p.m. close. Keep in mind that the stock fundamentally cheap with a P/E ratio of 5.45, according to Macrotrends.
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As of 5 p.m., the stock traded as low as $45.53 in after-hours trading. If the stock ends the week below its five-week modified moving average at $46.64, the weekly chart will no longer be positive.
Longer-term, Micron has been an extremely volatile stock. It set its all-time intraday high of $97.50 in July 2000 then traded as low as $1.69 in November 2008. During the current cycle, the intraday high was $64.66 during the week of June 1, 2018 to the Dec. 26 low of $28.39 -- a bear market decline of 56% and this dynamic is being consolidated in 2019.
The Daily Chart for Micron
Courtesy of Refinitiv XENITH
The daily chart for Micron shows that the stock 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." 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 how $38.66 became an annual pivot between Jan. 25 through June 28. 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. This provided the strength to the 2019 high of $51.39 set on Sept. 11. The monthly pivot at $50.30 has been a magnet and above the chart is the quarterly risky level at $54.70.
The Weekly Chart for Micron
Courtesy of Refinitiv XENITH
As of 5 p.m., the stock traded as low as $45.53 which could cause a downgrade to the weekly chart. The weekly chart for Micron is positive but overbought, with the stock above its five-week modified moving average of $46.64 and well above its 200-week simple moving average or "reversion to the mean" at $32.70. 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 end this week at 83.68 up from 82.99 on Sept.20. The stock needs to end the week above $46.64 to remain positive.
Trading Strategy: Buy weakness to the semiannual value level at $43.86 and reduce holdings on strength to the monthly and quarterly risky levels at $50.30 and $54.79, respectively.
How to use my value levels and risky levels:
Value levels and risky levels are based upon the past nine weekly, monthly, quarterly, semiannual and annual closes. The first set of levels was based upon the closes on Dec. 31. The original annual level remains in play.
The weekly level changes each week. The monthly level changes at the end of each month, the latest on Aug. 30. The quarterly level was changed at the end of June.
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.
Disclosure: The author has no positions in any stocks mentioned and no plans to initiate any positions within the next 72 hours.