Micron stock’s technical indicators
Micron (MU) stock fell significantly after Micron and KLA-Tencor (KLAC) raised concerns about declining memory chip prices. The fall removed MU’s upside YTD (year-to-date). The stock’s technicals also weakened. Technical indicators look at a stock’s price and volume and try to identify a pattern.
On September 6, more than 94 million Micron stocks were traded, which is far above its average daily trading volume of 37.3 million. Investor sentiment is bearish as Micron stock has declined below its 50-day and 200-day MAs (moving averages). An MA is the average of the closing price of the stock for a certain period. When the short-term moving average is lower than the long-term moving average, it shows a technical weakness and indicates a downward trend. The 200-day moving average shows a stock’s resistance. When the stock falls below that level, it raises an alarm that the price is set to fall further.
Steep declines sent Micron’s YTD returns into negative territory. Those steep price movements and high volumes come when institutional investors trade the stock.
Bearish sentiments surround Micron
In Q2 2018, hedge funds decreased their holdings in Micron by 7.7 million shares, with hedge fund managers George Soros, Andrew Law, and Richard Driehaus exiting the stock completely. Even insiders sold more stocks than they bought. There’s a possibility that more institutional investors exited the stock on September 6.
If we look at the historical price trend, Micron stock tends to underperform for 12 months after reaching its peak EBITDA margins. Even though Micron is transitioning away from commodity memory products to specialized memory products, the semiconductor business is cyclical. When memory prices rise, memory suppliers add capacity to increase supply, which increases inventory and reduces memory prices.
Next, we’ll compare the performance of Micron stock with stocks of specialized chipmakers Intel (INTC) and Nvidia (NVDA) to understand how Micron stock could perform even after becoming a specialized memory chip supplier.
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