Micron Technology Earnings Could Be the Catalyst for a Correction

Micron Technology stock could be due for a pullback after earnings

Tony Venosa, CMT

CMT, Senior Market Strategist

Mar 21, 2017 at 4:06 PM

Semiconductor concern Micron Technology (NASDAQ:MU) will step up to the earnings plate after the close on Thursday, March 23. The shares could be due for a pullback, after a run of 160% from their 2016 double-low, and earnings could be the catalyst for a correction. Below, I'll outline the levels I'm watching for MU stock -- including opportune entry points for both MU bulls and bears.

MU Levels to Watch

20% Year-to-Date Gain Level: Strong-performing MU may find reason to pause or pull back after touching $26.30 -- which represents a 20% year-to-date gain. The stock closed Tuesday at $25.52, up more than 16% in 2017.

Moving Averages: The 40-day moving average (red line) and the 80-day moving average (purple line) have guided MU higher and could mark a potential entry point on a pullback.

Fibonacci Retracements: The $26.36 area represents a 61.8% Fibonacci retracement of MU's 2014-2016 downside move. The round-number $20 level is a 38.2% Fibonacci retracement of the aforementioned drop, and may be a downside target if the above moving averages are broken. More aggressive bears could short shares or buy MU puts before earnings

Heavy Call Strikes: There's been notable call buying on MU, per the 10-day and 50-day call/put volume ratios on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). Peak call open interest in the front-month April series stands at the 25 and 26 strikes.

micron mu stock chart
Chart courtesy of StockCharts.com

Optimism Prevails Ahead of MU Earnings

As far as sentiment, options buyers aren't the only group in MU's bullish camp. Short interest dropped 7.9% during the past two reporting periods, and now sits at a five-year low. Likewise, there's strong optimism among analysts ahead of earnings, with 15 offering up "buy" or better ratings for Micron Technology, compared to just three "holds" and not one "sell" recommendation.

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