Micron Technology, Inc. (MU) shares rose nearly 10% this week after Bank of America Merrill Lynch analysts upgraded their assessment for semiconductor stocks. Analyst Vivek Arya noted that semiconductor sales were up 23% over the prior year in January, led by analog, discrete and DRAM, and he believes that there will be broad sales improvements throughout the supply chain during the second quarter.
Goldman Sachs analyst Mark Delaney also raised his price target on Micron shares from $55.00 to $58.00, saying that he expects second quarter financial results and third quarter guidance to come in ahead of Street expectations given positive DRAM trends. The options market has been extremely active following these analyst comments, with a five-to-one ratio of call options to put options during Tuesday's session. (See also: Micron May Rise 12% as Analysts Grow More Bullish.)
From a technical standpoint, the stock broke out from its prior highs earlier this week to reach fresh multi-year highs. The relative strength index (RSI) moved into overbought territory with a reading of 74.26, but the moving average convergence divergence (MACD) remains in a strong bullish uptrend. These indicators suggest that there may be some near-term consolidation, but the trend still remains very skewed toward the upside.
Traders should watch for some consolidation between trendline support at $50.00 and R2 resistance at $57.20 over the coming week. A breakout from R2 resistance could lead to fresh multi-year highs, while a breakdown below trendline support could lead to a move down to the pivot point at $45.26. According to NASDAQ, Micron is expected to report its second quarter earnings on March 22 after the market closes. (For more, see: Why Chip Stocks Will Keep Rising.)
Chart courtesy of StockCharts.com. The author holds no position in the stock(s) mentioned except through passively managed index funds.