Key Takeaways
- Micron shares pulled back from a record high Friday following a report that the company will stop providing server chips to data centers in China.
- After climbing above $200 for the first time earlier this month, the stock consolidated in a pennant before breaking out from the pattern on Thursday, potentially laying the groundwork for a continuation move higher.
- Bars pattern analysis indicates the price could climb to around $245. Investors should also watch key support levels on Micron’s chart around $158 and $130.
Micron Technology (MU) shares lost ground Friday following a report that the company will suspend some of its business in China.
Reuters reported Friday that Micron will no longer supply server chips for data centers in China, after the business struggled following a ban imposed by Chinese authorities on use of the company’s products in critical infrastructure. Micron will continue to sell chips to automotive and mobile phone sector customers in China, the report said.
Micron shares were down 2% at around $198 in recent trading, after gaining more than 5% yesterday as Wall Street analysts offered bullish commentary on the stock. Analysts at UBS raised their price target on the stock to $245, noting that Micron should benefit from “intensifying” memory and storage hardware shortages. Citi lifted its target to $240 and said the company sits well positioned to team up with ChatGPT maker OpenAI, which has recently stuck deals with Nvidia (NVDA), Advance Micro Devices (AMD), and Broadcom (AVGO).
Through midday Friday, Micron shares had gained 135% since the start of the year and were up 19% in October, as investors bet that surging AI date-center demand will fuel a memory chip boom.
Below, we break down the technicals on Micron’s chart and point out key price levels that investors will likely be watching.
Pennant Pattern Breakout
After climbing above $200 for the first time earlier this month, Micron shares consolidated in a pennant before breaking out from the pattern on Thursday. Importantly, the move occurred on the highest trading volume in more than three weeks, potentially laying the groundwork for a continuation move higher.
While the relative strength index sits near its overbought threshold, the indicator still remains significantly below its June and September peaks that preceded consolidation periods, indicating the stock has ample room for the recent uptrend to continue.
Let’s use technical analysis to forecast where Micron’s price may be headed next and also point out key support levels worth watching during pullbacks in the stock.
Potential Upside Price Target
Investors can forecast where Micron shares may be headed by using bars pattern analysis, a technique that analyzes prior trends to project future directional movements.
When applying the analysis to the chipmaker’s chart, we take the stock’s strong move higher that immediately preceded the pennant and reposition it from Thursday’s breakout point near the pattern’s top trendline.
This indicates the share price could rapidly climb to around $245 if a continuation move plays out.
Key Support Levels Worth Watching
During pullbacks, investors should initially watch the $158 level. This area could offer support near the prominent June 2024 swing high and a minor dip on the chart in September this year after an impulsive move higher.
Finally, a more-significant drop could see Micron shares revisit lower support near the key $130 level. Investors may look to set buy limit orders in this location near the top of a prior symmetrical triangle, which closely aligns with major peaks on the chart in April 2024 and June this year.
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As of the date this article was written, the author does not own any of the above securities.
