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RETRACEMENT


The 62% Key For Micron

10/28/05 02:00:34 PM
by Arthur Hill

The 62% retracement has worked well for Micron, and the stock is testing this level yet again.

Security:   MU
Position:   Hold

Since May, Micron Technology (MU) zigzagged its way higher with four upswings (zigs) and four downswings (zags) (Figure 1). Each upswing resulted in a higher high and affirmed the uptrend. Each down swing resulted in a higher low and found support near the 62% retracement mark. Yes, the stock found support near the 62% retracement mark three times in a row, and now, the fourth attempt is upon us.

FIGURE 1: MU. The Micron Technology stock has seen four zigzags in the space of six months, finding support near the 62% retracement three times in a row.
Graphic provided by: MetaStock.
Graphic provided by: MS QuoteCenter.
 
If only technical analysis were that easy. Once you have something figured out, it usually changes or ends up not working. However, I will consider MU bullish until proof of actual weakness emerges. First, the rising price channel remains in place and the string of higher highs and higher lows has yet to be broken. Second, the stock gapped higher at the end of September and this gap is holding. Third, the stock is finding support where it has in the past and bounced off 12.5 at least four times in the last two weeks.

Even though there is support around 12.5, the gap and support from the late September low hold the key. Gaps are bullish until proven otherwise. The stock moved into this gap but has yet to fill it, which would prove it otherwise. A move below 12.19 would fill the gap and this would be very negative. However, there is still some support around 11.6 from the September lows, and a break below this level would be the final straw. I would find it impossible to stay bullish after a trendline break, filled gap, and lower low.



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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Date: 11/02/05Rank: 4Comment: 
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