Micron Technology Could See Explosive Breakout if Bulls Gain Control

Two weeks ago, Micron Technology MU delivered an earnings report that blew the socks off of Wall Street. The company announced earnings of $1.18 on $7.75 billion, both numbers exceeded analysts' estimates and reversed a huge loss of $1.07 per share a year earlier.

The more impressive portion of the report came from guidance. Analysts modeled $1.52 per share earnings on sales of $8.27 billion; however, management guided Wall Street to an EPS of $1.74 on $8.7 billion in sales. Again, this reversed a loss from the prior year.

Bulls gapped the stock up strongly the day after the report. AI demand for data center DRAM pulled Micron deep into the AI-stock conversation. And everyone was excited. Until they weren’t.

Micron has struggled since the post-earnings gap higher. While the stock hasn’t filled the gap, it has retraced most of its move. While I generally buy breakouts, playing a retracement to the long side can work from a risk-reward standpoint if there is a clear stop, and I see a clear stop with Micron.

Micron has found support on its 10-day exponential moving average (EMA) for the last six trading sessions. A conservative trader may want to wait for a close over $105, but I would consider a partial position at this level with a second purchase on a close over $105. If the stock fails to hold its 21-day EMA, it would be a yellow flag; however, I wouldn’t stop out of the position unless it closed below $95. A smaller starter position would allow for a broader stop level around $95 or even as low as $92.50.

If bulls can regain control of Micron, a break above $105 invites a retest of the August and September highs. Above $113 creates the possibility of an explosive breakout, but bulls have worked to do before that level comes into play. Overall, I like the risk versus reward potential here for aggressive traders.

At the time of publication, Byrne had no positions in any securities mentioned.