- Micron Technology shares moved sharply higher after Deutsche Bank upgraded the stock to Buy with a $60 price target.
- Memory markets remain in correction mode, but many analysts agree that a turnaround could materialize during the first quarter of next year.
- Micron stock broke out from trendline resistance toward reaction highs, but it's quickly approaching overbought levels.
Deutsche Bank analyst Sidney Ho cited DRAM inventory accumulation as a catalyst for the upgrade. The analyst believes that the memory market is heading into a multi-quarter correction, but channel checks suggest that DRAM demand has increased in smartphone and server markets, and the fourth quarter could mark a trough in the cycle.
DRAM, or Dynamic Random Access Memory, is a type of RAM that stores each bit of data on a separate capacitor. This requires less physical space than storing the same amount of data statically, making it superior to SRAM.
Analysts have had mixed opinions on Micron stock over the past couple of months. Wedbush analyst Matt Bryson warned in late September that disappointing margin guidance could dampen the bull case, but most analysts agree that 2021 could become a turning point for DRAM pricing after the market recovers from an anticipated fourth quarter slide.
From a technical standpoint, the stock broke out from trendline resistance toward reaction highs of $54.00 to $55.00 during Tuesday's session. The relative strength index (RSI) rose toward overbought levels with a reading of 64.31, but the moving average convergence divergence (MACD) recently experienced a bullish crossover.
Traders should watch for consolidation above trendline resistance-turned-support at around $51.00. If the stock extends its breakout, the price could move toward reaction highs of $54.00 to $55.00. If the stock breaks down from trendline support, traders could see a move toward the 200-day moving average at $49.20 or trendline support and the 50-day moving average at $47.58.
The Bottom Line
Micron Technology shares rose 4% during Tuesday's session after Deutsche Bank upgraded the stock to Buy and raised its price target to $60.00 per share. While memory markets remain in a correction, many analysts agree that the market could experience a turnaround during the first quarter of next year.
The author holds no position in the stock(s) mentioned except through passively managed index funds.