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The semiconductor shortage had initially boosted Micron’s stock price, but the company recently faced sharp losses despite reporting strong earnings.
Micron Technology (MU: NASDAQ) closed at $80.91, down $4.87 or 5.73%.
Before yesterday’s earnings announcement, Micron had been recovering from a five-month low. On June 21st, the stock fell to $75.71, a level not seen since January.
In the following eight days, Micron’s stock gained 12.70%, closing higher on seven of those days. By Wednesday, the stock was at $84.98, just below its 50-day moving average of $85.71. This put it in a good position to potentially test this year’s high of $96.96, which was just $0.54 short of the all-time high from the tech bubble in the late 1990s.
For the quarter ending June 3rd, Micron reported revenue of $7.42 billion, a 36% increase from last year, beating the $7.22 billion estimate. Earnings per share were $1.88, also exceeding the $1.72 estimate.
Despite these strong results, the market reacted negatively. UBS analyst Timothy Arcuri did lower his price target for Micron from $120 to $110, but this still suggests potential for stock growth.
On the daily chart, yesterday’s decline pushed Micron below its 100-day moving average of $82.18. The last time this happened, the stock dropped 9.5% in three days, which is concerning.
If this pattern repeats, the stock might reach the 200-day moving average at $74.89. However, a strong support level around $76.00 might prevent further declines. Below the 200-day moving average, there’s also a descending trendline at $72.50, which adds to the technical support.
Given the current state of the chip industry, a significant drop could present a buying opportunity. It might be wise to monitor how the stock performs today after yesterday’s decline. If the stock falls below the 200-day moving average and the trendline at $72.50, the bullish outlook may be invalidated.