Shares of Micron Technology (MU) have rallied 125% over the last year, reflecting the strength in the memory-chip space, but there is a transition underway that could be signaling a reversal in the trend. The stock has been trading in a horizontal channel for the last two months and, after recently breaking below a long-term uptrend line and its rising 50-day moving average, it is now retesting channel support.

The first time it touched this level was in early June and then later that month after reporting a top and bottom line earnings beat.

It was able to bounce in the first half of this month but unable to return to the channel high, and closed out last week near its low and on channel support. The $29 area also supplied resistance in April and May, and formed the top of a rise in triangle pattern, whose measured move projected up to the $33 level and turned out to be the top end of the horizontal channel.

A confirmed break below pattern support projects back down the $25.00 area, which is the current location of the rising 200- and moving average. The relative strength index has been moving in bearish divergence -- sideways price action last two months, and is tracking below its declining 21-period moving average and centerline. This reflects the decline in positive price momentum. The Chandre Trend Meter the signs in numerical value to a stock based on multiple technical indicators over six time frames, and it shows the stock moving out of its bullish green zone and into the negative lower half of its range. Accumulation/distribution has made a lower high and drop below its signal average, suggesting the stock is under selling pressure.

Micron is a short-sale candidate after a lower candle close below $29 support, using a position size allows for a buy-to-cover stop above the $31 level. The initial trade target objective is the $25 area.

Micron shares fell 4% to $28.10 on Monday afternoon.

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The author is an independent contributor and at the time of publication had no position in the stock mentioned.

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