Micron (MU) has fallen to its lowest level since May 22, trading down to $847.46. That decline has pushed the stock into a key swing area between $818.67 and $860.68, a zone that could attract buyers looking for value after the sharp selloff.
Since peaking at an all-time high the day after its better-than-expected earnings report on June 25, the stock has now dropped nearly 32%. The question for investors is whether that decline has become overdone.
For dip buyers, the current setup offers a clearly defined risk. The lower end of the support zone at $818.67 provides a logical level against which to manage a position. From current levels, that represents roughly $32, or about 3.7%, of downside risk. While that’s not insignificant, it may be an attractive tradeoff after a stock has already corrected more than 30% in just a few weeks.
If buyers can defend this support area, the first upside target comes near $900, home to the 38.2% retracement of the rally from the March 31 low to the June 25 high. A move back above that level would increase the bullish bias and should encourage additional upside momentum. The 100 and 200 hour MAs are converged at $1015.
Of course, the bear case remains that Micron is reverting to its historical reputation as a highly cyclical semiconductor stock, with the AI-driven enthusiasm fading.Markets can price in that shift well before the earnings fully play out. However, with risk clearly defined, traders and investors know where they’re wrong. If sentiment shifts back toward the AI growth story, buying after a 32% correction in roughly three weeks could prove to be a favorable risk-reward opportunity.
What do you think?
This article was written by Greg Michalowski at investinglive.com.