Micron Technology, Inc. (MU) shares fell more than 6% on Wednesday morning after analysts expressed concerns about the memory market. RBC Capital lowered its price target from $83.00 to $70.00 on Tuesday while also cutting its price target for Western Digital Corporation (WDC) due to similar concerns. Goldman Sachs followed suit with a downgrade of Micron shares from Buy to Neutral, citing falling memory chip prices in both the DRAM and NAND markets.
Despite bearish concerns expressed by the company and a growing number of analysts, Bank of America Merrill Lynch remains bullish on Micron stock with a Buy rating and a $100.00 price target. The analyst firm believes that the recent correction in Micron shares is due to concerns about a downturn in memory prices, but its research suggests record-high revenue and profitability, and it recommends the stock ahead of its upcoming fourth quarter earnings report. (See also: Micron's Stock Faces Massive Levels of Volatility.)
From a technical standpoint, Micron stock broke down from key trendline support at around $45.00 and S2 support at $42.55 over the past few sessions. The relative strength index (RSI) moved deeper into oversold territory with a reading of 23.26, and the moving average convergence divergence (MACD) remains in a bearish crossover. These technical indicators suggest that the sell-off could stall before continuing lower.
Traders should watch for some consolidation around S2 support levels at $42.55 over the near term given the oversold RSI readings. The stock has strong technical support near the trendline at around $38.90, where it could consolidate before a rebound higher. If the stock breaks out higher, traders should watch for a move to retest trendline resistance at around $45.00 on the upside. (For more, see: Micron, Chip Stocks at Risk of Deteriorating Industry Fundamentals: Morgan Stanley.)
Chart courtesy of StockCharts.com. The author holds no position in the stock(s) mentioned except through passively managed index funds.