Micron Technology, Inc. (MU) shares have fallen about 2.5% this week after Morgan Stanley downgraded Taiwan Semiconductor Manufacturing Company Limited (TSM) from Overweight to Equal Weight. The analysts cited falling NAND prices during the fourth quarter and uncertain DRAM dynamics looking past the first quarter of next year, which led to a broad sell-off among many chipmakers, including Micron as well as Western Digital Corporation (WDC) and Applied Materials, Inc. (AMAT).

Despite the bearish industry outlook, Morgan Stanley actually increased its price target on Micron from $39.00 to $55.00, saying that it recommended Micron over other chipmakers. Stifel analysts further defended Micron by saying that NAND prices are likely to fall in line with or better than the firm's estimates. Many analysts are also more confident than Morgan Stanley regarding DRAM pricing moving into next year. (See also: Why Micron Is Poised to Rise 20%.)

Technical chart showing the performance of Micron Technology, Inc. (MU) stock

From a technical standpoint, Micron shares have moved off of their 52-week highs of around $50.00 toward the middle of their price channel. The relative strength index (RSI) responded by moving just out of overbought territory at 67.91, but the moving average convergence divergence (MACD) could see a bearish crossover in the near term. Traders may want to maintain a neutral stance on the stock given the uncertainty.

Traders should watch for a rebound from R2 support at $48.32 to retest prior highs at $50.00 or trendline resistance at around $52.00. If the stock breaks down from R2 support, traders should watch for a move to test lower trendline and R1 support at $46.32. A breakdown from these levels could lead to a longer-term reversal to the pivot point and 50-day moving average at around $42.07. (For more, see: SOX Semiconductor Index at 17-Year Resistance.)

Chart courtesy of StockCharts.com. The author holds no position in the stock(s) mentioned except through passively managed index funds.

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