Micron Technology, Inc. (MU) shares moved lower during Thursday's session after the U.S. Commerce Department moved to add Huawei and 70 of its affiliates to its "Entity List." The move would ban the Chinese telecom firm from acquiring components and technology from U.S. companies without government approval. Over the past two quarters, Benchmark analysts calculated that Huawei contributed to about 13% of Micron's revenue.
Morgan Stanley analyst Joseph Moore agrees that Micron could be exposed to the ban of sales from U.S. companies to Huawei, but he added that a similar ban on ZTE last year was ultimately withdrawn. Whether the Huawei ban would be lifted in the near future remains uncertain. The move is just the latest in a series of tiffs between China and the United States as the trade war between the two countries carries on.
President Trump separately signed an executive order barring U.S. companies from using telecom equipment made by companies that the U.S. deems to pose a national security threat after having already raised tariffs on $200 billion worth of Chinese imports from 10% to 20%. Trump has threatened to launch 25% tariffs on another $300 billion worth of Chinese goods if his trade demands aren't met in negotiations.
From a technical standpoint, the stock retested trendline support at around $37.00 at the bottom of its price channel. The relative strength index (RSI) remains oversold with a reading of 33.32, while the moving average convergence divergence (MACD) remains in a bearish downtrend. These indicators suggest that the stock could see some near-term consolidation, but the intermediate-term trend remains lower.
Traders should watch for some consolidation near trendline support at $37.00 over the coming sessions. If the stock breaks down from these levels, traders could see a move lower toward reaction lows of around $29.00. If the stock rebounds higher, traders could see a move to retest upper trendline resistance at $44.00, although that scenario appears less likely to occur.
The author holds no position in the stock(s) mentioned except through passively managed index funds.