Micron Technology (MU) was the best-performing stock of 2017, growing more than 80%. During its last quarterly earnings results on March 20, 2019, Micron stock rose ahead of its earnings and jumped 9.6% one day after its earnings release as it beat analysts’ EPS estimate even though it missed their revenue estimate.
However, Micron fell 11% the next day as analysts downgraded it on its weaker-than-expected guidance.
However, things are different this time around, as the overall semiconductor market is in a downtrend, and memory stocks have been the worst hit. Micron is currently trading at ~$33, 14.6% higher than its 52-week low of $28.39. It could fall below $30 if its upcoming fiscal 2019 third-quarter earnings, which are due for release on June 25, miss analysts’ estimates.
To understand investors’ current sentiments about Micron, let’s look at its technical indicators.
One measure of technical analysis is the moving average, which takes the average of a stock’s prices over a certain period to understand in which direction its movement is skewed. When a short-term moving average is higher than a long-term moving average, it shows technical strength.
Micron is currently trading below its 50-day moving average but above its 200-day moving average. The stock could fall below its 200-day moving average and enter technical weakness if it reports disappointing earnings.
The memory market has few players, and Micron is the only US-based pure-play DRAM (dynamic random-access memory) and NAND (negative-AND) manufacturer. Its direct competitors are South Korea’s Samsung and SK Hynix, making it difficult to find a comparable US stock that faces the same economic challenges. The closest one is NAND chip maker Western Digital (WDC).
WDC is already experiencing technical weakness, as it’s trading below its 50-day and 200-day moving averages. Moreover, its 50-day moving average is lower than its 200-day moving average.
Micron is stronger than WDC because of its exposure to the DRAM market and its strong balance sheet and cash flows. Micron is a good bet for the long term but it is very volatile in the short term.