Micron, Nvidia, AMD Are Poised For Big Rebounds

(Note: The author of this fundamental analysis is a financial writer and portfolio manager.)

The recent stock market sell-off hit the chip sector hard, with Micron Technology Inc. (MU), Nvidia Corp. (NVDA), and Advanced Micro Devices, Inc. (AMD) all down as much as 20 percent. But a study of the technical trading patterns of each of these three stocks suggests they may see a sharp rebound in the coming weeks. 

Since March 1, AMD's stock has plunged by nearly 20 percent from its highs, while Micron has fallen by more than 15 percent, and Nvidia by almost 10 percent. The technology sector quickly fell out of favor towards the end of March, and these three companies were not spared.

Now, that may be changing.

AMD

An Investopedia article on March 21 noted that shares of AMD were on the verge of a breakdown and could push down the stock to a critical support level at $9.80. Over the past week, the stock has hit that support level and then stayed above it. The relative strength index (RSI) also hit oversold levels, falling below 30. The 5-minute intraday chart shows the stock testing support on three occasions at around $9.80, and breaking a short-term downtrend. From a technical view, that could result in shares rebounding by roughly 9 percent to $10.70. 

Nvidia

Nvidia shares unexpectedly plunged on March 19 with the rest of the technology sector, after a failed technical breakout. That led to a decline of about 12 percent from $250 to technical support at approximately $219. With the stock holding support over past two trading sessions, signs are emerging of a trend higher. The first test for Nvidia comes at a technical resistance level of about $234, about 3 percent higher than its current price of around $228. But should the stock rise above $234, the stock has a path back towards $250, about 10 percent higher than its current price. (See: Nvidia's Breakout Seen Fueling 14% Stock Gain)

Micron

Micron is also putting in a bottom like AMD and Nvidia, but it still has a bit more work to do. The stock has found meaningful support at $52, a significant price level for Micron. If the stock can complete a bottoming pattern, it could lead to the shares rising towards $56, a climb of about 9 percent. If it should fail, the stock could fall further to roughly $49.75, a drop of another 3.5 percent. 

If market sentiment against big tech stocks continues to grow, that will present a powerful headwind to the recovery of AMD, Nvidia and Micron. But based on the technical charts today, AMD and Nvidia are nicely poised for rebounds while Micron's technical charts are more vulnerable. 

Michael Kramer is the Founder of Mott Capital Management LLC, a registered investment adviser, and the manager of the company's actively managed, long-only Thematic Growth Portfolio. Kramer typically buys and holds stocks for a duration of three to five years. Click here for Kramer's bio and his portfolio's holdingsInformation presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Past performance is not indicative of future performance.