Let’s Pay a Visit to Micron’s Island
Micron’s earnings beat might just negate the bearish island patten that formed earlier this week. Here’s what to watch for.
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Note: I will be on vacation for the next two weeks. However, I will write a column over the July 4th long weekend.
Since it remains the semis world and Micron (MU) just blew the numbers away, let me report on the chart since everyone seems to want to know if that is an island overhead (three days ago, the gap up followed by the gap down).
First, a definition. An island is a trading pattern that takes place on a gap up, followed by a gap down. Or vice versa. The action between those two gaps creates an island (circled). If it arrives at a low, it is bullish. At a high, it is bearish. But the same way I draw thick lines to give a stock a chance to go a little further than is obvious, I give an island a few days to prove itself.
In Micron’s case, with earnings on the horizon, giving it a chance is exactly how I would view it. So now, the gap begins around 1160 (the low of that gap up day), so if MU can recapture 1160, there is no island.
But if MU cannot make a higher high in the next few days and then heads south, even if the gap has been filled, you want to pay attention to this recent low around 1000. That’s where the uptrend line comes in, and it’s the recent minor low. If those break over the course of the next few weeks, I would finally say it’s done something wrong. Otherwise, this will look like yet another fifteen percent correction as we discussed the other evening.
You know what I find really amusing, though? It was just a few short weeks ago folks got a little hysterical over interest rates. Now rates have backed off. But the one group they continue to ignore is my old friend, the Utes. The Utes have had exactly three red days in the month of June and are up six percent. And no one cares. They even crossed the downtrend line on Wednesday.
I think there is resistance starting in this 1150 area, but I think dips get bought, and the Utes chew through some of that resistance. I continue to like the Utes.
Away from that, we should check in on the DSI readings since it appears everyone seemed to have noticed the move in precious metals today. GLD did not get all the way to 360, but its DSI is now 10. So is Silver’s.
And oil? That’s at 12. The US Dollar got to 83.
I continue to think, and perhaps the timing will be a bit off due to the end of the quarter (who wants to show this on their books? Ewww!), that by the time I return from my vacation, we will have gotten a decent, tradeable bounce in gold and oil.
