Mapping the Market: Micron shares appear set for further losses

Micron Technology shares have had a strong year, up around 220%, but ​they have struggled since peaking in June and look headed for another pullback, ​technical analysis indicates.

Click here for a detailed technical ‌analysis ​chart. Technical analysis uses charts of past price moves to help predict where a market might go next. Many analysts use candlestick charts. Each bar, or "candle," shows the price a stock opened and closed at, plus its highest and lowest ‌prices, over a set period such as a day or a week.

Together, the candles show whether buyers or sellers have the upper hand. Analysts also look for repeating shapes in these charts, called patterns, that have come before rallies and drops in the past. One of these patterns has formed on Micron's weekly chart, where each candle covers one ‌week of trading. It is called a rising wedge. It is made of two upward-sloping lines, one linking the stock's recent highs and one linking its ‌lows. The lines slowly get closer and would eventually meet. Even though the pattern forms while prices are climbing, the narrowing shows the rally is running out of steam. It usually means losses will follow.

Micron's wedge took shape when the shares started to recover in August. That followed a drop of more than 40% from their all-time high of $1,255, reached on June 25, according to data supplied by LSEG. This ⁠week, the ​shares fell below the wedge's lower ⁠line, a sign that the downward phase may be starting.

To confirm a chart signal, analysts often use momentum gauges, which measure how strongly a price is moving in one direction. One is the Relative ⁠Strength Index, or RSI. It measures how fast and how far a stock's price has moved recently to show whether buyers or sellers are in control. Another is Moving Average Convergence ​Divergence, or MACD. A moving average is a stock's average price over a set number of days or weeks, updated as each new period is ⁠added. MACD compares two moving averages of different lengths to show whether momentum is building or fading.

Right now, both RSI and MACD are pointing lower, which means momentum is on the downside. Based on this, Micron ⁠is ​likely to fall toward the $887 to $903 area, and then possibly toward the $770 to $807 area.

However, if Micron climbs above the $1,010 to $1,030 area, especially if it ends a week there, the bearish, or negative, outlook would probably fade. Micron Technology did not respond to an email requesting comment.

What the chart shows: (Mapping the Market is a daily column written by Reuters journalists. The commentary is based on a technical analysis of financial charts, which helps assess the likelihood of future price moves but does not guarantee the outcome. The column does not ‌constitute investment advice or ‌trading recommendations. )

(Christopher Romano is a Reuters market analyst. The views expressed are his own; ​Editing by Burton Frierson and Sonali Paul)