Stock Of The Day: Is This The Top On Micron?

Micron Technology, Inc. MU is trading lower on Thursday. The company reported third-quarter earnings with adjusted earnings per share of $1.91. This was well ahead of the consensus estimates of $1.60.

There are two key resistance levels that traders are watching. This is why it is the Stock of the Day.

As you can see on the chart, Micron had a significant sell-off last June. The selling paused around $130 in early July. There was a large amount of buying interest at this price. There were more than enough buy orders to fill all of the sell orders, so the move lower halted.

But after a few weeks, this support broke and the shares dropped below it.

When this happened, many of the people who bought shares decided that doing so was a mistake. They made up their minds to hold onto their losing positions.

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But they also decided to sell if the stock ever got back to their buy price. This would allow them to exit their positions at breakeven. So now that the stock has returned to this level, these unhappy buyers are placing sell orders.

The large concentration of these orders has created resistance at a former bottom.

Another level that traders are watching is around $156. This level was a former top in June. Just like there can be resistance at former bottoms, there can also be resistance at former tops.

It happens for the same reason.

There are people who bought Micron right at the peak in June. When the price dropped, some of them experienced regret. Many of these regretful buyers vowed to sell their shares if the stock eventually returned to the same price they paid.

As a result, if Micron breaks the current resistance around $130 and rallies back to $156, they will place sell orders. If there is a large enough number of these orders, it can create resistance around the same price that had been a peak.

Sometimes traders have difficulty deciding where to sell a stock. But if it gets to a price that had previously been a peak or a bottom, there is a good chance it hits resistance. These could be logical levels to exit a position.

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