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Key Takeaways
- Micron shares fell more than 5% in premarket trading Thursday after the chipmaker posted quarterly results and revenue guidance that came in below Wall Street’s lofty expectations.
- The stock price reversed last Thursday on above-average volume to form a bearish wide-ranging day, a particularly volatile trading session that can warn of a major trend reversal.
- Micron shares made a higher high last week, but the relative strength index made a shallower high, creating a bearish divergence between the price and indicator, also suggesting a weakening of the longer-term uptrend.
- The Micron share price may find support at 50%, 61.8%, and 78.6% Fibonacci retracement levels, located on the chart at $131.63, $125.52 and $116.81, respectively.
Micron (MU) shares fell sharply in premarket trading Thursday after the chipmaker posted quarterly results and revenue guidance that came in below Wall Street’s lofty expectations. The Idaho-based company has seen its share price surge 67% since the start of the year, fueled by accelerating demand for chips to power memory-hungry artificial intelligence (AI) servers.
Below, we use technical analysis to locate key levels on the Micron chart to watch out for amid further post-earnings weakness.
Chart Indicators Point to Weakening Momentum
Micron shares have trended steadily higher throughout the first half of 2024, with only one retracement below the closely watched 50-day moving average (MA) in late February.
However, more recently, several technical indicators point to waning upward momentum. Following the price climbing to a new record high last Tuesday, it promptly reversed course on above-average volume to form a bearish wide-ranging day, a particularly volatile trading session that can warn of a major trend reversal.
Moreover, as the stock registered a higher high last week, the relative strength index (RSI) made a shallower high, creating a bearish divergence between the price and indicator, also suggesting a weakening of the longer-term uptrend.
Monitor These Levels Amid Post-Earnings Retracement
Amid the stock’s projected post earnings sell-off, we can use prior price action and a Fibonacci grid stretched from the April low to last week’s high to help identify areas where the price may encounter support.
Firstly, the shares may see buying interest near the key 50% Fibonacci retracement level at $131.63, an area on the chart that also sits in close proximity to a price peak in May.
The 61.8% Fib level may attract buyers at $125.52, a region that roughly aligns with the rising 50-day MA to provide a confluence of support.
Meanwhile, a move lower to the 78.6% Fib level sitting near a series of price action between April and May could offer support at $116.81.
Finally, a significantly deeper correction below the Fibonacci grid could see the stock fill its second-quarter earnings gap at $96.25, which sits 32% below Wednesday’s closing price of $142.36.
Micron shares were down 5.7% at $134.24 in premarket trading.
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