Micron Technology, Inc. (MU) shares extended their rally to retest reaction highs during Thursday's session following Deutsche Bank's favorable comments earlier this week.
Deutsche Bank analyst Sidney Ho said that global trade tensions were shifting some of the bargaining power from memory buyers to memory suppliers despite elevated inventory levels. While DRAM spot prices have fallen from their July highs, they remain about 10% higher than they stood in June. Ho believes that the risk of further significant price declines are diminishing and that the fourth quarter could become a trough. The analyst maintains a Buy rating on Micron stock with a $55 price target.
Mizho analyst Vijay Rakesh also raised his price target on Micron to $50 per share, saying that channel checks point to positive trends for NAND and DRAM prices. Rakesh believes that both NAND and DRAM prices are trending better than expected moving into the second half of the year, which could set the stage for better-than-expected performance among producers like Micron and Western Digital Corporation (WDC).
From a technical standpoint, the stock broke out from reaction highs made in late-July during Thursday's session. The relative strength index (RSI) moved closer to overbought levels with a reading of 68.34, but the moving average convergence divergence (MACD) experienced a bullish crossover that could signal further upside ahead. These indicators suggest that the stock could consolidate above new support levels before extending their rally over the coming sessions.
Traders should watch for some consolidation above reaction highs of around $49.00 over the coming sessions before the stock resumes its uptrend. If the stock breaks down from these levels, traders could see a move lower to retest the 50-day moving average at $43.53, but that scenario seems less likely to occur given the recent strength. The next major area of resistance is reaction highs of around $54 per share.
The author holds no position in the stock(s) mentioned except through passively managed index funds.