Micron Is a Top-3 Stock to Short After Surprise Earnings Response
These three names have shown little interest in rising with the rest of the market.
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It is tough to wrap your head around a stock that is not participating with the markets rising. Sure, technology stocks have been hit hard lately but there is more to it, as we have seen a broad rally of other sectors moving higher.
With that backdrop, these three charts have big problems and they are likely only going to get bigger.
While we will not weigh in with fundamental analysis on these issues, we will pop the hood for a look at the charts.
Let’s dig in:
ChronoScale Falls Sharply on High Volume
One of our favorite patterns for a short play is a huge price move down on big volume. This is the sort of behavior akin to the start of a downtrend. ChronoScale (CHRN) seems to be starting that move, with a huge drop down this week. Now, we can see the 50-day moving average (blue line) might hold the stock as good support, but the other indicators seem to say “not true.”
Relative strength has rolled over, money flow is weak and not expanding. Notice the MACD, which has again rolled over for a sell signal while the price bar is looking for a followthrough to the downside. That might just happen here, so let’s target the $10 area, which is the 200-day moving average, put in a stop at $24 just in case.
Mueller Breaks Big Support
Typically, when a stock breaks through support areas we normally see a counter move in the other direction. For Mueller (MLI), that did not occur with a break of the 50-day MA recently and now another break of the 200-day MA. This stock looks catastrophic here, and while a bounce is likely because of the severe oversold condition there is just nothing here to support the stock moving higher, at least showing an uptrend.
Lower highs, lower lows is our textbook definition of an uptrend, Mueller checks all the boxes. Money flow is bearish, MACD has been on a sell signal and continues to nosedive while volume intensifies with every down move. We could see a prolonged move to the next support area, call it $47 or so. We expect a bounce but not as high as $64, so let’s use that as a stop.
Not Even the Mighty Micron Can Avoid The Selling
With strong earnings and guidance last week one would have expected to see Micron (MU) moving much higher as the last of the sideline investors piled in. But one thing we know is “sell in the news” is a serious move, and if you’re late and then get stuck, you’re in a world of hurt. The last few sessions for Micron have been volatile to say the least, and we could see a bit more downside here before the stock could take off again to the upside. We don’t see the downtrend developing just yet but if it does there are some lower downside targets.
Notice the heavy volume on the down days, money flow is really fallen of late, losing the support of big institutional investors (for now). MACD has rolled over and the RSI sits at an area not seen since April. Mediocre at best, so let’s target the $800 level here, put in a stop at $1,120 just in case. This could take some time.
