Money Markets

Should Investors Take a Bite out of Micron Technology, Inc. (MU)?

Over the last few days fluctuation in the stock of Micron Technology, Inc. (NASDAQ:MU) was the main talking point of investors. Analysts often use price and volume data to predict future stock performance. In the case of MU, the chart has some interesting things to say about where the stock might be headed.

How has the stock performed recently?

Micron Technology, Inc. (NASDAQ:MU) has been trading in a bullish manner, based on the relative positions of the stock’s 20 and 200 day moving averages. In the last month, the price of MU has decreased -1.45%. Shares are now up over the past year, outperforming the broad market by -100% and outperformed a peer group of similar companies by 2497%. After the latest session, which saw the stock close at a price of $42.19, MU sits below its 52-week high.

Momentum indicators

Of course, these surface-level price movements don’t tell us much about the direction that MU may be headed in the future. To do this, analysts often study the speed and magnitude of a stock’s price movements with what are known as momentum indicators. The logic is that as a stock’s momentum slows, it may be nearing key support or resistance levels and possibly the end of a current trend. Two such indicators are the RSI (Relative Strength Index) and the Stochastic %k Oscillator, which fluctuate on a scale of 0 to 100. A reading above 70 indicates that a stock is overvalued, and a reading below 30 implies that it is undervalued. The 20-day RSI for MU is 48.93%, which suggests that the stock is not particularly expensive or cheap, and not predisposed to a reactive price movement based on this measure. The 20-day Stochastic %k measure, which sits at 40.78%, tells a similar story, and suggests that MU currently trades in neutral territory.

What do the trading volumes reveal?

Volume patterns can also be useful for predicting future performance. When trading activity is abnormally high, it’s often a sign that the market feels particularly strong in one way or another about the future direction of a stock. Micron Technology, Inc. (MU) average trading volume of 42,096,422 during the past month is 23.63% above its average volume over the past year, indicating that investors have been more active than usual in the stock in recent times.

What do the analysts think?

MU is currently undervalued by -28.93% relative to the average 1-year price target of $59.36 taken from a group of Wall Street Analysts. The average investment recommendation on a scale of 1 to 5 (1 being a strong buy, 3 a hold, and 5 a sell) is 1.80, which implies that analysts are generally bullish in their outlook for MU over the next year.

How risky is the stock?

Absolute price performance isn’t the only thing analysts consider when predicting future performance: volatility matters as well. Beta, which measures the stock’s volatility relative to the overall market, is a simple but effective metric for assessing risk.

Micron Technology, Inc. (NASDAQ:MU) has a beta of 1.55, compared to a beta of 1 for the market, which implies that the stock’s price movements are more extreme than the market as a whole. MU therefore has an above average level of market risk. During the past couple of weeks, MU average daily volatility was 68.24%, which is -22.14 percentage points higher than the average volatility over the past 100 days.

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