Micron Finding Support

08/23/05 07:47:17 AM

by Arthur Hill

Micron came down hard after the July surge, but currently it is consolidating at a logical support level and should be watched closely.

Security: MU
Position: Hold

The overall trend for Micron (MU) since April is up, and this trend can be broken down into four swings. The first advance was in May and the June decline retraced 50-62% (two swings). The second advance was in July and the current decline has retraced 62% (two more swings). These are normal retracements after an advance and logical support points. In addition to the 62% retracement, the stock also has support from broken resistance around 11 and the April trendline extends to 10.7. See Figure 1.

Figure 1: Micron. The overall trend since April is up.

Graphic provided by: MetaStock.

Graphic provided by: Reuters Data.

The relative strength index (RSI) is also trading at support. While a reading below 30 signals an oversold situation in RSI, stocks often find support above 30 in an uptrend. RSI found support around 40 in late June and is again trading around 40 (gray oval). The indicator firmed over the last few days and a move back above 50 would be bullish for RSI and momentum. This signal worked quite well in June.

Even though the past is key to the future in technical analysis, it is important to wait for some sort of breakout. The stock consolidated over the last eight days and established resistance at 11.57 from the August 15th high. In addition, a number of potentially bullish candlestick patterns formed over the last eight days. These require confirmation and a move above the August 15th high would do the trick.

Arthur Hill

Arthur Hill is currently editor of TDTrader.com, a website specializing in trading strategies, sector/industry specific breadth stats and overall technical analysis. He passed the Society of Technical Analysts (STA London) diploma exam with distinction is a Certified Financial Technician (CFTe). Prior to TD Trader, he was the Chief Technical Analyst for Stockcharts.com and the main contributor to the ChartSchool.

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Micron Finding Support

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