Micron Correction May Have Ended

Micron Technology Inc. (MU) has rallied for seven sessions in a row, raising hopes that a persistent downtick has finally come to an end. The stock shed more than 32% between April and October, dumping to the lowest low since December 2020, with 2021 growth slammed by the reality of supply chain disruptions. Positive comments by CEO Sanjay Mehrotra have eased shareholder anxiety since that time, fueling the current oversold bounce.

All Eyes on Thursday’s Investor Event

Options activity is increasing ahead of Micron’s Analyst and Investor Event on Thursday, contributing to the relentless uptick. However, it will take a lot of good news to overcome short-term overbought technical readings so don’t be surprised if an aggressive sell-the-news reaction hits the tape after the conference. And, to be honest, it’s still too early to expect supply and inventory headwinds to show substantial improvement.

Bank of America Securities Vivek Arya posted a mixed outlook last month, noting “On the positive side, we like management’s solid execution, improving FCF returns, tech leadership and leverage to secular trends in cloud computing, 5G and autos. However, inventory headwinds and supply shortages of non-memory components in PC/mobile markets are driving a near to medium-term decline in memory pricing, which in turn could keep MU stock rangebound until the cycle reaccelerates.”

Wall Street and Technical Outlook

Wall Street’s outlook has deteriorated in the last three months, now standing at an ‘Overweight’ rating based upon 25 ‘Buy’, 2 ‘Overweight’, 7 ‘Hold’, and 1 ‘Sell’ recommendation. Price targets currently range from a low of $58 to a Street-high $165 while the stock is set to open Tuesday’s session about $16 below the median $91 target. This low placement tracks the broad failure of analysts to measure the impact of supply disruptions on 2021 market performance.

Micron Technology broke out above 2018 resistance at 65 in November 2020 and rallied within 54 cents of 2000’s all-time high at 97.50 in April 2021. It reversed off this major resistance level through the second and third quarters, breaking 50-week moving average support in August. The stock has been testing this level for the last three months, with a rally above 77 setting off buying signals that could yield an eventual test at the prior peak.

For a look at today’s economic events, check out our earnings calendar.

Disclosure: the author held no positions in aforementioned securities at the time of publication.