Micron Technology, Inc. (MU) reports fiscal second quarter results after Wednesday's closing bell, with analysts expecting earnings per share (EPS) of $1.68 on revenue of $5.84 billion. The stock fell nearly 8% and broke down to a 16-month low following December's first quarter release as the company met estimates but sharply lowered guidance. A first quarter bounce reversed at 200-day exponential moving average (EMA) resistance in February, while the price has now settled at 50-day EMA support.

Analysts are divided heading into this week's confessional, with Deutsche Bank expecting weak forward guidance due to a slump in DRAM prices, which fell 17% year over year in January and 14% in February. On the flip side, boutique firm Standpoint Research upgraded Micron stock to "buy" on Monday, telling clients to pick up shares ahead of the earnings report. Overall, bears seem to hold the advantage, with DRAM prices expected to drop 25% to 30% in the first quarter.

MU Long-Term Chart (1990 – 2019)

Long-term technical chart showing the share price performance of Micron Technology, Inc. (MU)

Micron stock posted a three-year low at a split-adjusted 68 cents in 1990 and turned higher, entering a strong uptrend that eased into a vertical trajectory in 1993. The rally posted impressive gains into 1995 before topping out in the mid-$40s and selling off into the single digits in 1996. It tested that low two years later and took off in a parabolic rally impulse that posted an all-time high at $97.50 in the summer of 2000.

Aggressive bears took control after the internet bubble burst, dumping the stock to a nine-year low at the start of 2003. The subsequent recovery wave attracted little buying pressure, stalling in the upper teens in 2006, ahead of an orderly decline that escalated during the 2008 economic collapse. This selling wave penetrated the single digits for the third time in 12 years, hitting a 16-year low at $1.59 in November, which marks the lowest low in the past decade.

The stock bounced above $10 in 2010 and eased into a trading range that persisted into a 2013 breakout that reached a 12-year high in the $30s in 2014. Shareholders then got crushed by another descent into the single digits, but the decline into 2016 posted a long-term higher low, setting the stage for a powerful rally impulse that reversed at the .618 Fibonacci sell-off retracement level in the mid-$60s in June 2018. 

The sell-off into December ended at the 50-month EMA, yielding a bounce that established the first monthly stochastics buy cycle since 2016. The indicator has now crossed the panel midpoint, but first quarter gains have been limited, with price entrenched in the lower third of the 2018 trading range. Even so, the buy cycle remains fully intact, increasing the odds for higher prices through the second quarter.

MU Short-Term Chart (2016 – 2019)

Short-term technical chart showing the share price performance of Micron Technology, Inc. (MU)

A Fibonacci grid stretched across the uptrend that started in 2016 places the December low at the .618 retracement level, while the first quarter bounce stalled at the .382 retracement. This center zone commonly generates mixed price action, suggesting a two-sided tape that could persist into the summer months. Look for volatility to increase sharply if either end of this trading range is broken in coming weeks.

The on-balance volume (OBV) accumulation-distribution indicator hit a multi-year high in June 2018 and entered a modest distribution wave that ended at a nine-month low in December. Buying pressure since that time has recouped just one-third of the deficit, but that isn't too bad because the indicator remains situated close to last year's high. Taken together with other bullish technicals, this volume support tells us that a positive catalyst could yield unusually strong upside.

The Bottom Line

Micron Technology heads into Wednesday's post-market earnings report with low expectations due to a sharp drop in first quarter DRAM pricing.

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