Best Semiconductor Stocks To Buy In May

Key Insights

  • The world’s focus on chips has not helped stocks of semiconductor companies in recent months. 
  • Micron shares suffered a serious pullback, and the stock is trading at just 5 forward P/E. 
  • In Intel’s case, markets focused on the company’s heavy spending, but the stock could attract value-oriented players who are willing to bet on Intel’s rebound. 

The world markets continue to suffer from chip shortage, but shares of semiconductor companies have been recently moving lower. As a result, some semiconductor stocks declined to attractive valuation levels.

Micron

Shares of Micron  peaked near the $98 level at the start of this year and have recently made several attempts to settle below the $66 level.

Interestingly, analyst estimates have been moving higher in recent months. Currently, Micron is expected to report earnings of $9.56 per share in the current year and $12.53 per share in the next year, so the stock is trading at just 5 forward P/E.

It looks that the recent weakness has been caused by general sell-off in the tech segment rather than by the company’s own problems. In this light, Micron stock would have a good chance to gain solid upside momentum when the general market begins to rebound from lows.

Intel

Unlike Micron, Intel has some internal problems. The company is making significant investments and expects that profit margins will be lower before rebounding in 2025.

Not surprisingly, analyst estimates have been declining in recent months. The company is expected to report earnings of $3.61 per share in the next year, so the stock is trading at 11 forward P/E.

Intel stock has not traded at current levels since 2017. The company remains one of the world’s tech leaders, and it looks that its shares could attract value-oriented players who are willing to bet on Intel’s rebound in the longer term.

To keep up with the latest earnings updates, visit our earnings calendar.

When Will S&P500 Find Direction?

I’ve heard a lot of technical talk that the S&P 500 could slosh around in this 4,200 to 4,600 range until it finds new direction.

Ukraine is still in the focus

The focus lately has been the war in Ukraine and the Federal Reserve, both of which continue to exacerbate investor uncertainty. While Russia shows no signs of backing off in Ukraine, there hasn’t been too much change on the ground as Putin’s assault seems to have stalled on several fronts.

In fact, some reports indicate Russia has actually lost a bit of ground in some areas. A few military and political experts say they see hopeful signs in a prisoner exchange that Ukraine and Russia conducted this week, though others remain skeptical that Putin is no where ready to strike a peace deal.

Many experts in the space say the biggest worry is with Putin’s army failing to meet his objectives, he could turn to other even more deadly tactics. The U.S. and EU have been more vocal with their warnings to Russia this week that the use of chemical or biological weapons will bring a strong response from the West. No details have been provided on what that might be and officials behind the scenes have said they are being “deliberately ambiguous” in order to keep Putin off-guard.

Can Fed control the inflation?

As for the Fed, fears are again rising that the central bank will not be able to cool inflation without damaging the economy, particularly with the additional challenges the war has created.

Fed watchers will get a slew of new data to chew on next week, including the PCE Pries Index next Thursday, which is one of the Fed’s favorite inflation gauges. The year-over-year rate in January rose to +5.2% from a previous +4.9% and most expect it will rise again in the February read.

With the Russia-Ukraine conflict compounding the raw materials crunch and Covid lockdowns in China showing signs of jamming up supply chains again, whatever the gauge shows next Thursday, it will likely climb higher in the months ahead. Investors get a look at the U.S. labor market next Friday with the March Employment Report. Consensus is calling for a gain of around +500,000 jobs after a gain of over +675,000 in February.

Investors will be focused more on the wage component which came in flat in January. That helped bring the year-over-year rate down a bit but wages were still up more than +5% vs. February 2021.

Wage inflation is very “sticky” so the higher labor costs climb, the more it limits how much price gains can ultimately moderate.

Data to watch

Other data next week includes advance reads on International Trade, Retail Inventories, and Wholesale Inventories on Monday; the S&P Case-Shiller Home Price Index and Consumer Confidence on Tuesday; the ADP Employment Change and final estimate of Q4 GDP on Wednesday; Personal Income and Outlays and Chicago PMI on Thursday; and ISM Manufacturing and Construction Spending on Friday.

On the earnings front, highlights next week include Chewy, Concentrix, Lululemon, and Micron Technology on Tuesday; BioNTech and Paychex on Wednesday; and Walgreens on Thursday. Russia’s war in Ukraine and the Fed’s war against inflation should remain in the spotlight…

The Big Food Worry… There’s no question food-importing nations are going to feel some major pain. In the USA prices at the grocery store more than likely continue even higher. The world is screaming for more acres and more production but supply chain dislocations along with Russia’s war in Ukraine has fertilizer and input prices sky-high and in some nations in extremely short supply.

Micron Testing 2020 Breakout Ahead of Report

Micron Technology Inc. (MU) reports Q2 2022 results after Tuesday’s closing bell, with analysts looking for a profit of $1.98 per-share on $7.53 billion in revenue. If met, earnings-per-share (EPS) will more than double the $0.98 posted in the same quarter last year. The stock soared more than 10% in December after beating Q1 EPS and raising Q2 guidance but turned tail in January, dropping more than 20% into late March.

Memory Chip Production Under Pressure

The Russia – Ukraine war has triggered turmoil throughout the semiconductor space, with a number of key manufacturing materials in short supply outside of the rogue state. Micron has fared as well as most chip stocks during this period, outperforming PHLX Semiconductor Index by about five percentage points. However, both instruments are struggling at their 200-day moving averages, raising the potential for even lower prices in the second quarter.

Flash memory prices are rising rapidly, forcing analysts to lift quarterly estimates, but total volumes will suffer as a result of supply disruptions and bearish sentiment. As Citi analyst Peter Lee pointed out when war broke out, “memory makers currently hold 6 to 8 weeks of inventory of these critical gasses, higher than the normal level of 4 weeks. Yet supply of these gasses is highly dependent on Ukraine, and any disruptions to output arising from military action in the region could lead to semiconductor production being severely impacted”.

Wall Street and Technical Outlook

Unfortunately, Wall Street consensus hasn’t budged in the last month, raising the prospect of multiple downgrades. It currently stands at a euphoric ‘Buy’ rating based upon 32 ‘Buy’, 2 ‘Overweight’, and 4 ‘Hold’ recommendations. Price targets range from a low of $77 to a Street-high $165 while the stock closed Friday’s session just a buck above the low target. Look for any weakness in this week’s confessional to bring down these lofty targets.

Micron Technology rallied above 2018 resistance in the 60s in November 2020, entering an uptrend that stalled within 54 cents of the 2000 high in April 2021.  A January 2022 breakout attempt failed after exceeding the multi-decade peak by 95 cents, ahead of aggressive selling pressure that reached within three points of 2020 breakout support in February. A selloff here could be catastrophic, failing the breakout and establishing a new secular downtrend.

Catch up on the latest price action with our new ETF performance breakdown.

Disclosure: the author held no positions in aforementioned securities at the time of publication. 

Micron Technology Attracting Big Money

So, what’s Big Money? Said simply, that’s when a stock goes up in price alongside chunky volumes. It’s indicative of institutions betting on the shares.

Smart money managers are always looking for the next hot stock. And Micron has many fundamental qualities that are attractive.

This sets up well for the stock going forward. But how the shares have been trading points to more upside. As I’ll show you, the Big Money has been consistent in the shares all year.

You see, fund managers are always looking to bet on the next outlier stocks…the best in class. They spend countless hours sizing up companies, reading reports, speaking to analysts…you name it. When they find a company firing on all cylinders, they pounce in a big way.

That’s why I’ve learned how critical it is to gauge Big Money demand for shares. To show you what I mean, have a look at all the Big Money signals MU has made the last year.

The last few weeks have seen Big Money activity, too. Each green bar signals big trading volumes as the stock ramped in price:

Source: www.mapsignals.com

In 2021, the stock attracted 19 Big Money buy signals. Generally speaking, recent green bars could mean more upside is ahead.

Now, let’s check out technical action grabbing my attention:

Outperformance is important for leading stocks.

Next, it’s a good idea to check under the hood. Meaning, I want to make sure the fundamental story is strong too. As you can see, Micron has been growing sales and earnings at a double-digit rate. Take a look:

  • 1-year sales growth rate (+34.2%)
  • 1-year earnings growth rate (+30.7%)

Source: FactSet

Marrying great fundamentals with technically superior stocks is a winning recipe over the long-term.

In fact, MU has been a top-rated stock at my research firm, MAPsignals, for years. That means the stock has buy pressure, strong technicals, and growing fundamentals. We have a ranking process that showcases stocks like this on a weekly basis.

MU has a lot of qualities that are attracting Big Money. It’s made this list 14 times since 2015, with its first appearance on 12/27/2016…and gaining 299.79% since. The blue bars below show the times that Micron was a top pick:

Source: www.mapsignals.com

It’s been a top stock in the technology sector according to the MAPsignals process. I wouldn’t be surprised if MU makes additional appearances in the years to come. Let’s tie this all together.

The Bottom Line

The Micron rally could have further to go. Big Money buying in the shares is signaling to take notice. Shares could be positioned for further upside. Given the historical gains in share price and strong fundamentals, this stock could be worth a spot in a growth-oriented portfolio.

Disclosure: the author holds no positions in MU in personal or managed accounts at the time of publication.

Learn more about the MAPsignals process here.

Disclaimer

https://mapsignals.com/contact/

 

Big Money Buys Up MaxLinear

So, what’s Big Money? Said simply, that’s when a stock goes up in price alongside chunky volumes. It’s indicative of institutions betting on the shares.

Smart money managers are always looking for the next hot stock. And MaxLinear has many fundamental qualities that are attractive.

This sets up well for the stock going forward. But how the shares have been trading points to more upside. As I’ll show you, the Big Money has been consistent in the shares all year.

You see, fund managers are always looking to bet on the next outlier stocks…the best in class. They spend countless hours sizing up companies, reading reports, speaking to analysts…you name it. When they find a company firing on all cylinders, they pounce in a big way.

That’s why I’ve learned how critical it is to gauge Big Money demand for shares. To show you what I mean, have a look at all the Big Money signals MXL has made the last year.

The last few weeks have seen Big Money activity, too. Each green bar signals big trading volumes as the stock ramped in price:

Source: www.mapsignals.com

In 2021, the stock attracted 18 Big Money buy signals. Generally speaking, recent green bars could mean more upside is ahead.

Now, let’s check out technical action grabbing my attention:

Outperformance is important for leading stocks.

Next, it’s a good idea to check under the hood. Meaning, I want to make sure the fundamental story is strong too. As you can see, MaxLinear has been growing sales and earnings at a double-digit rate. Take a look:

  • 1-year sales growth rate (+137.1%)
  • 1-year earnings growth rate (+17.5%)

Source: FactSet

Marrying great fundamentals with technically superior stocks is a winning recipe over the long-term.

In fact, MXL has been a top-rated stock at my research firm, MAPsignals, for years. That means the stock has buy pressure, strong technicals, and growing fundamentals. We have a ranking process that showcases stocks like this on a weekly basis.

MXL has a lot of qualities that are attracting Big Money. Since 2015, it’s made this list 15 times, with its first appearance on 9/22/2015…and gaining 515.93% since. The blue bars below show the times that MaxLinear was a top pick:

Source: www.mapsignals.com

It’s been a top stock in the technology sector according to the MAPsignals process. I wouldn’t be surprised if MXL makes additional appearances in the years to come. Let’s tie this all together.

The Bottom Line

The MaxLinear rally could have further to go. Big Money buying in the shares is signaling to take notice. Shares could be positioned for further upside. Given the historical gains in share price and strong fundamentals, this stock could be worth a spot in a growth-oriented portfolio.

Disclosure: the author holds long positions in MXL in managed accounts at the time of publication.

Learn more about the MAPsignals process here.

Disclaimer

https://mapsignals.com/contact/

 

Why Micron Stock Is Up By 9% Today

Micron Stock Rallies After Strong Quarterly Report

Shares of Micron gained strong upside momentum after the company reported results for its first quarter of fiscal 2022. Micron reported revenue of $7.69 billion and adjusted earnings of $2.16 per share, beating analyst estimates on both earnings and revenue.

The company remained optimistic about its future performance: “As powerful secular trends including 5G, AI, and EV adoption fuel demand growth, our technology leadership and world-class execution position us to create significant shareholder value in fiscal 2022 and beyond”.

In the next quarter, Micron expects to report revenue of $7.3 billion – $7.7 billion and adjusted earnings of $1.85 – $2.05 per share. The company noted that it expected that situation with chips will get better in 2022, which would allow its customers to increase production, boosting demand for Micron’s products.

What’s Next For Micron Stock?

Currently, analysts expect that Micron will report earnings of $8.75 per share in the current fiscal year and earnings of $11.00 per share in the next year, so the stock is trading at 8 forward P/E, which is cheap for the current market environment.

It looks that the market became more skeptical about richly valued tech stocks in recent weeks, and investors are ready to move some capital into value plays. In case value stocks get more support at the beginning of 2022, Micron stock will have a good chance to get above this year’s highs near the $97 level.

It should be noted that Micron’s own growth story looks interesting. The company’s earnings are expected to grow by roughly 25% from fiscal 2022 to fiscal 2023, and it remains to be seen whether the market will remain so conservative in Micron’s valuation in case the company meets its growth targets. At this point, it looks that Micron stock has a good chance to develop additional upside momentum in the upcoming weeks.

For a look at all of today’s economic events, check out our economic calendar.

Why Micron Stock May Be a Good Bet in 2022, Outperform Broader Semis

Micron is experiencing an increase in demand for memory chips due to cloud computing companies and the rapid adoption of 5G cellular networks. Furthermore, growth is driven by high-value solutions, customer engagement and cost structure improvement.

“We think Micron Technology (MU) should outperform broader semis in 2022 based on 1) a notable reduction in customer DRAM inventory levels across server, PC and mobile markets; 2) more rational DRAM wafer capacity growth in 2022 than 2021; and 3) strong leverage to growing DRAM content in AI/ML servers, ADAS and EV vehicles, and 5G Android smartphones. We are increasing our price target from $80 to $99,” noted Karl Ackerman, equity analyst at Cowen.

Later today, the world’s leading semiconductor manufacturer is expected to report its fiscal first-quarter earnings of $2.01 per share, representing year-over-year growth of more than 155% from $0.78 per share seen in the same quarter a year ago.

The Boise Idaho-based semiconductor company is expected to post revenue growth of over 30% to around $7.7 billion from a year earlier. In the last two years, the company has always topped expectations on earnings per share.

However, for the fiscal Q1 guidance, the world’s leading semiconductor manufacturer forecast revenue of $7.65 billion, plus or minus $200 million, missing the Wall Street consensus of $8.57 billion. In addition, the company projected adjusted earnings per share of $2.10, plus or minus 10 cents, missing expectations of $2.33.

The company, which provides components for Apple, has been affected by short-term supply issues in its own supply chain. Power outages in China have impacted the supply chains for other tech companies as well.

Micron’s revenues are much larger than that of Texas Instruments Incorporated (TI), but the latter has a higher EBIT margin and a better cash cushion. However, our comparison of the post-Covid recovery above, shows that Micron has been performing better than TI lately. Given Micron’s P/S ratio of around 3x, compared to TI’s 10x, we believe that this gap could close. As such, we believe that Micron stock is currently a much better bet compared to Texas Instruments stock,” said analysts at TREFIS in its December 16 note.

Micron Technology stock soared over 10% so far this year. It traded 1.27% lower at 81.95 in pre-market trading on Monday.

Analyst Comments

“While the underlying demand trends are strong and producer inventory levels are low heading into a period of seasonal strength, there are some signs of inventory adjustments short term after customers-built inventory,” noted Joseph Moore, equity analyst at Morgan Stanley.

“We see demand growth on the back of seasonality, memory elasticity/higher content per unit, and low customer inventories, and very slow supply growth in DRAM given declines in capex. We continue to believe that memory stocks have a relatively well-defined earnings cycle, though highs and lows are likely to be better than they have been historically.”

Micron Technology Stock Price Forecast

Twenty-two analysts who offered stock ratings for Micron Technology in the last three months forecast the average price in 12 months of $99.18 with a high forecast of $165.00 and a low forecast of $58.00.

The average price target represents a 19.49% change from the last price of $83.00. Of those 22 analysts, 16 rated “Buy”, five rated “Hold” while one rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $75 with a high of $120 under a bull scenario and $40 under the worst-case scenario. The firm gave an “Equal-weight” rating on the semiconductor’s stock.

Several other analysts have also updated their stock outlook. UBS raised the target price to $99 from $90. Cowen and company lifted the price objective to $99 from $80. Mizuho upped the price target to $95 from $75.

Technical analysis suggests it is good to buy now as 100-day Moving Average and 20-200-day MACD Oscillator signals a buying opportunity.

Check out FX Empire’s earnings calendar

Best Stocks, Crypto, and ETFs to Watch – Nike, Micron, Shiba Inu, and SPDR S&P 500 Trust in Focus

Omicron has put a damper on the 2021 holiday season while threatening first quarter disruptions, fueled by high numbers of workers on sick leave or isolating as a result of positive tests, even if asymptomatic. This could aggravate already disrupted supply chains and undermine investor sentiment, raising the potential for negative first quarter U.S. GDP. Economically sensitive funds, including SPDR S&P 500 Trust (SPY), could enter a correction during this period, favoring aggressive short sales.

Dow component Nike Inc. (NKE) reports Q2 2022 earnings after Monday’s closing bell, with analysts expecting a profit of $0.63 per-share on $11.25 billion in revenue. If met, earnings-per-share (EPS) will mark a 19% profit decrease compared to the same quarter in 2020. The stock failed a breakout above the August high at 174.38 in November and investors have been jumping ship since that time, worried that Omicron and pro sports cancellations will impact revenue.

Micron Technology Inc. (MU) broke out of a 7-month downtrend in November and stalled at the .618 Fibonacci retracement level of the 32-point decline about three weeks ago. It’s been oscillating in a trading range between 80 and 89 since that time while background technicals continue to improve.  As a result, market players are positioned for a strong report when the memory giant releases quarterly results in Monday’s post-market.

Shiba Inu broke November support at $0.00003510 at the start of December and has ticked lower into the second half of the month. It’s still trading above the long shadow carved during the Dec. 4th selloff, raising odds that sell stops are accumulating below $0.00002915. A violation of that price level could generate a rapid volatility spike, dumping the cryptocurrency into the .786 Fibonacci retracement level of September into October uptrend at $0.00002280.

The Omicron-induced flight to safety has benefited high dividend stocks that can weather economic headwinds.  General Mills Inc. (GIS) broke out to an all-time high last week, exhibiting high percentage gains rarely seen in the food production stocks. Adding to upside, the company pays a healthy 3.02% forward dividend yield that will ease pain when more favorable conditions return to the ticker tape. GIS reports Q2 2022 earnings ahead of Tuesday’s opening bell.

Catch up on the latest price action with our new ETF performance breakdown.

Disclosure: the author held no positions in aforementioned securities at the time of publication. 

Earnings to Watch in Holiday-Shortened Week: Micron Technology, Nike, General Mills and CarMax in Focus

The following is a list of earnings slated for release December 20-24, along with a few previews. Although next week’s earnings are unlikely to have much of an effect on major market movements, it is sufficient to gauge investors’ sentiment.

Earnings Calendar For The Week Of December 20

Monday (December 20)

IN THE SPOTLIGHT: MICRON TECHNOLOGY, NIKE

MICRON TECHNOLOGY: The world’s leading semiconductor manufacturer is expected to report its fiscal first-quarter earnings of $2.01 per share, representing year-over-year growth of more than 155% from $0.78 per share seen in the same quarter a year ago.

The Boise Idaho-based semiconductor company is expected to post revenue growth of over 30% to around $7.7 billion from a year earlier. In the last two years, the company has topped expectations on earnings per share at all times.

“While the underlying demand trends are strong and producer inventory levels are low heading into a period of seasonal strength, there are some signs of inventory adjustments short term after customers-built inventory,” noted Joseph Moore, equity analyst at Morgan Stanley.

“We see demand growth on the back of seasonality, memory elasticity/higher content per unit, and low customer inventories, and very slow supply growth in DRAM given declines in capex. We continue to believe that memory stocks have a relatively well-defined earnings cycle, though highs and lows are likely to be better than they have been historically.”

NIKE: The world’s largest athletic footwear and apparel seller is expected to report earnings per share of $0.62 in the fiscal second quarter, which represents a year-over-year decline of over 20% from $0.78 per share seen in the same period a year ago.

The Beaverton, Oregon, footwear retailer would post revenue of $11.23 billion, down about 0.1% from a year earlier. For four quarters in a row, the company has exceeded expectations on earnings per share.

“We are raising our price target to $189 representing 40x our FY23E EPS of $4.73. We don’t believe management will make significant changes to its FY22 guidance but view the business as running above plan in N. America and Europe (EMEA). The gross margin could be a lever to raise back to prior guidance (+150bps at the high end). China is a point of uncertainty with investors and the model,” noted John Kernan, equity analyst at Cowen.

“We are raising our expectations for Q2, largely driven by an incrementally stronger outlook for N.A. and EMEA, with less conviction behind results in Greater China. We now model Q2 revenues +3% y/y ex FX to $11.52B vs consensus of $11.255B, driven by N.A. +2% (+3% vs 2019 compared to Q1’s +14% vs 2019), EMEA +1% (+17% vs 2019compared to Q1’s +19%), Greater China -2%, and APLA +10%.

We forecast gross margin expanding +130bps y/y, as higher full-price selling and DTC mix offsets higher freight costs and some product cost inflation (we include gross margin quarterly bps drivers in Fig 5). On a 2-year stack basis, product costs have deleveraged 240bps or more in each of the last two quarters. We see SG&A dollars growing +10% y/y to 31.1% of revenues (+204bps y/y). Ultimately, this drives EPS of $0.75 vs consensus of $0.63 – we model a 100bps impact from FX.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE DECEMBER 20

TICKER COMPANY EPS FORECAST
MU Micron Technology, Inc.(MU) $2.01
NKE NIKE, Inc.(NKE) $0.63
BRZE Braze, Inc.(BRZE) $0.63

Tuesday (December 21)

IN THE SPOTLIGHT: GENERAL MILLS

The Minneapolis Minnesota-based company, General Mills, is expected to report its fiscal second-quarter earnings of $1.05 per share down from $1.06 per share seen in the same period a year ago.

The consumer foods manufacturer’s revenue would decline over 2% year-over-year to around $4.8 billion up from $4.72 billion seen a year earlier. In the last two years, the company has missed earnings per share estimates only once.

“While growth abounded for domestic food manufacturers as consumers rushed to stock up on essential wares as COVID-19 took hold, it hasn’t been a pure panacea for this intensely competitive space. And we think the future trajectory hinges on which of the trends that took centre stage the past few years will hold,” noted Erin Lash, Sector Director at Morningstar.

“In this context, while we concede many consumers honed their cooking skills while sheltering at home, as busy schedules resume, we think food consumption will revert such that a greater portion of budgets is expended outside of the home, in line with pre-pandemic levels. Further, although grocers simplified shelf assortments to maximize productivity during the peak in demand, we think the variety will return as supply chains normalize.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE DECEMBER 21

TICKER COMPANY EPS FORECAST
FDS FactSet Research Systems Inc.(FDS) $2.99
GIS General Mills, Inc.(GIS) $1.05
NEOG Neogen Corporation(NEOG) $0.17

Wednesday (December 22)

IN THE SPOTLIGHT: CARMAX

The used-car retailer CarMax is expected to report its fiscal third-quarter earnings of $1.49 per share, which represents year-over-year growth of about 5% from $1.42 per share seen in the same period a year ago.

The Richmond, Virginia-based used car giant would post year-over-year revenue growth of nearly 50% to $7.63 billion in the quarter ended November 2021. In the last two years, the company has exceeded expectations on earnings per share with an average surprise of over 80%.

“Based on historical & current data, we expect to see strength in used car sales as we move forward, particularly given the shortage of new car inventory, manufacturers pulling back on incentives, and potential tailwinds from de-urbanization, mass transit, ride-sharing, and travel. We expect CarMax (KMX) to successfully execute their Omnichannel strategy, providing both online and physical dealer options to consumers,” noted Adam Jonas, equity analyst at Morgan Stanley.

KMX has consistently generated >$2,000 GPU and has one of the strongest balance sheets amongst the dealers. Long term, we estimate strong growth in same-store sales along new store openings, allowing KMX to achieve operating leverage, with upside from the omni-channel rollout.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE DECEMBER 22

TICKER COMPANY EPS FORECAST
CTAS Cintas Corporation(CTAS) $2.62
KMX CarMax, Inc.(KMX) $1.5
PAYX Paychex, Inc.(PAYX) $0.79

Thursday (December 23)

No major earnings are scheduled for release.

Friday (December 24)

The New York Stock Exchange and Nasdaq observe Christmas, markets will be closed on Friday.

Micron Could Break Out to New Highs in 2022

Micron Technology Inc. (MU) has ended a 6-month correction and broken out above a series of lower highs, raising odds the memory giant will test April’s 21-year high in the mid-90s. The all-time high, posted during the Internet bubble in 2000, resides just 54 cents above that price level, indicating the stock could finally join the rest of the semiconductor universe in a generational uptrend that offers substantial upside.

Memory Sales Exceeding Estimates

Memory demand is improving across personal computers, servers, and handheld devices, contrary to broad expectations for slumping growth into 2022. DRAM pricing remains an issue but robust sales could easily overcome that headwind, allowing Micron to exceed conservative revenue estimates still in play at most Wall Street research firms. An upturn in pricing could be the ‘icing on the cake’ next year, underpinning exceptionally strong annual performance.

Cowen analyst Karl Ackerman raised his firm’s price target from $80 to $99 on Monday morning, noting “We think MU should outperform broader semis in C22 based on 1) a notable reduction in customer DRAM inventory levels across server, PC and mobile markets; 2) more rational DRAM wafer capacity growth in C22 than C21; and 3) strong leverage to growing DRAM content in AI/ML servers, ADAS and EV vehicles, and 5G Android.

Wall Street and Technical Outlook

Wall Street consensus has improved modestly in the last three months, now standing at a ‘Moderate Buy’ rating based upon 16 ‘Buy’,  5 ‘Hold’, and 1 ‘Sell’ recommendation. Price targets currently range from a low of $58 to a Street-high $165 while the stock is set to open Tuesday’s session about $14 below the median $98 target. Supply disruptions have impacted these targets, suggesting analysts haven’t spent enough time evaluating the improving sales outlook.

Micron Technology rallied above 2018 resistance at 65 in November 2020 and stalled in April 2021 less than a buck below 2000’s all-time high at 97.50. The subsequent downturn persisted through the second and third quarters, dropping the stock to a 10-month low in October. It added 23 points into early December and is now consolidating above 50- and 200-day moving average support, setting the stage for a final thrust up to long term resistance near triple digits.

Catch up on the latest price action with our new ETF performance breakdown.

Disclosure: the author held no positions in aforementioned securities at the time of publication. 

Micron Correction May Have Ended

Micron Technology Inc. (MU) has rallied for seven sessions in a row, raising hopes that a persistent downtick has finally come to an end. The stock shed more than 32% between April and October, dumping to the lowest low since December 2020, with 2021 growth slammed by the reality of supply chain disruptions. Positive comments by CEO Sanjay Mehrotra have eased shareholder anxiety since that time, fueling the current oversold bounce.

All Eyes on Thursday’s Investor Event

Options activity is increasing ahead of Micron’s Analyst and Investor Event on Thursday, contributing to the relentless uptick. However, it will take a lot of good news to overcome short-term overbought technical readings so don’t be surprised if an aggressive sell-the-news reaction hits the tape after the conference. And, to be honest, it’s still too early to expect supply and inventory headwinds to show substantial improvement.

Bank of America Securities Vivek Arya posted a mixed outlook last month, noting “On the positive side, we like management’s solid execution, improving FCF returns, tech leadership and leverage to secular trends in cloud computing, 5G and autos. However, inventory headwinds and supply shortages of non-memory components in PC/mobile markets are driving a near to medium-term decline in memory pricing, which in turn could keep MU stock rangebound until the cycle reaccelerates.”

Wall Street and Technical Outlook

Wall Street’s outlook has deteriorated in the last three months, now standing at an ‘Overweight’ rating based upon 25 ‘Buy’, 2 ‘Overweight’, 7 ‘Hold’, and 1 ‘Sell’ recommendation. Price targets currently range from a low of $58 to a Street-high $165 while the stock is set to open Tuesday’s session about $16 below the median $91 target. This low placement tracks the broad failure of analysts to measure the impact of supply disruptions on 2021 market performance.

Micron Technology broke out above 2018 resistance at 65 in November 2020 and rallied within 54 cents of 2000’s all-time high at 97.50 in April 2021. It reversed off this major resistance level through the second and third quarters, breaking 50-week moving average support in August. The stock has been testing this level for the last three months, with a rally above 77 setting off buying signals that could yield an eventual test at the prior peak.

For a look at today’s economic events, check out our earnings calendar.

Disclosure: the author held no positions in aforementioned securities at the time of publication. 

Analysts Cut Micron Price Targets After Q3 Earnings Guidance Disappoints

Micron shares were down over 3% in pre-market trading on Wednesday as several equity analysts slashed their one-year price targets following the company’s lowered third-quarter sales guidance.

Micron Technology, which provides components for Apple, has also been affected by short-term supply issues in its own supply chain. Power outages in China have impacted the supply chains for other tech companies as well.

In the current quarter, the world’s leading semiconductor manufacturer forecast revenue of $7.65 billion, plus or minus $200 million, missing the Wall Street consensus of $8.57 billion. In addition, the company projected adjusted earnings per share of $2.10, plus or minus 10 cents, missing expectations of $2.33.

Following this, Micron shares slumped over 3% to $73.10 in pre-market trading on Wednesday.

Analyst Comments

Micron Technology (MU) posted a solid August quarter, but guided November slightly below; still, the company projected record revenues for FY22 and seems comfortable with customer inventories. Our view remains more cautious, as we aren’t seeing improvement in elevated inventory conditions at customers,” noted Joseph Moore, Equity Analyst at Morgan Stanley.

Micron Technology Stock Price Forecast

Twenty-one analysts who offered stock ratings for Micron Technology in the last three months forecast the average price in 12 months of $104.17 with a high forecast of $165.00 and a low forecast of $70.00.

The average price target represents a 42.50% change from the last price of $73.10. From those 16 analysts, five rated “Buy”, one rated “Hold” while none rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $75 with a high of $120 under a bull scenario and $40 under the worst-case scenario. The firm gave an “Equal-weight” rating on the semiconductor manufacturer’s stock.

Several other analysts have also updated their stock outlook. Wedbush slashed the target price to $85 from $105. Deutsche Bank cut the price target to $90 from $95. Cowen and company lowered the target price to $80 from $90. Mizuho cut the target price to $90 from $97.

“Shares of Micron fell 3% during normal trading hours on Sept. 28 amid a technology stock sell-off caused by higher Treasury yields, and nearly 4% during after-hours trading. We are maintaining our fair value estimate of $90 per share and we think long-term investors should find current levels of no-moat Micron attractive,” noted Abhinav Davuluri, Sector Strategist at Morningstar.

Check out FX Empire’s earnings calendar

Micron Shares Tumble as Chip Outlook Disappoints

Micron Technology’s latest quarter didn’t go over well, and investors are punishing the stock. Shares of the chipmaker were down 2% in anticipation of the company’s earnings report and proceeded to tumble another 4% once the results were in. Investors were disappointed by Micron’s outlook, not its fiscal Q4 results.

 

Micron Earnings

Micron beat Wall Street estimates with fiscal Q4 EPS of $2.42 on revenue of $8.27 billion, up 37%. Micron’s outlook for Q1 2022 gave investors pause, however, as it paints the picture of weaker demand for its chips that are used in computers and mobile devices. The company’s guidance suggests that the good times, which have lasted for the past year, could be coming to an end for now.

Micron’s fiscal Q1 guidance is for revenue of $7.65 billion, while Wall Street was targeting something closer to $8.5 billion. Micron is aiming for EPS of $2.10 per share on a fully diluted basis, which is also below Street estimates.

Micron’s management team pointed to “supply chain challenges” that its PC customers are currently balancing. Micron’s revenue is diversified beyond just PC demand, but the company is still vulnerable to the ebbs and flows in demand, as its latest outlook has shown.

The sting is that Micron is coming off a record year in which demand for its chips was booming. Times were so good that Micron raised its prices in fiscal 2021, but now the outlook has become clouded and there might not be room to raise prices any further. Investors have not rewarded Micron shares along the way, with the stock down 1.2% year-to-date as investors have fled the volatility that is inherent with the chip sector.

Tech Trouble

It wasn’t just Micron shares that got pummeled on Tuesday, as the broader tech sector became the target amid rising Treasury yields. Oanda senior analyst Edward Moya is quoted by Bloomberg as saying,

“This surge in Treasury yields is kryptonite for the Nasdaq.”

Rising yields are especially threatening to high-growth stocks including technology companies, as it throws a wrench into their future earnings potential based on analyst models.

As for Micron, investors are disappointed about the short-term outlook. On the flip side, the company continues to generate billions in free cash flow, and Micron is a dividend-paying stock, which could help to soften the blow for investors.

Micron Correction Slowly Coming to an End

Micron Technology Inc. (MU) reports Q4 2021 earnings after Tuesday’s closing bell, with analysts looking for a profit of $2.34 per-share on $8.21 billion in revenue. If met, earnings-per-share (EPS) will more than double the profit posted in the same quarter last year. The stock sold off 5.7% after beating Q3 estimates and raising Q4 EPS guidance in late June and fell another 14% into August before bouncing a few points into this week. It’s booked a negative 1% 2021 return-to-date after gaining nearly 40% last year.

Headwinds Could Persist into 2022

The company has been plagued by supply disruptions, like other semiconductor manufacturers, compounded by weakness in DRAM memory pricing. Well-known hedge funds have taken notice during the quarter, reducing or closing positions at funds run by George Soros, Stanley Druckenmiller, and David Tepper. Worse yet, Micron continues to underperform other chip stocks by a country mile, dropping 14% in the last three months while PHLX Semiconductor Index hit an all-time high less than two weeks ago.

Susquehanna analyst Mehdi Hosseini sounded upbeat last week, despite lowering the firm’s target from $150 to $135, noting “Although recent checks suggest a flattening in blended DRAM/NAND ASPs into YE21 and early 2022, we have decided to reduce estimates to reflect a worst case scenario of down low single digit in Nov-Q and down mid-single digit in Feb-Q. Nonetheless, with stock trading at ~6x our updated CY22 PE and actually down YTD, we argue that worst case scenario is already dialed into the share price”.

Wall Street and Technical Outlook

Wall Street consensus has missed the mark, with a ‘Buy’ rating based upon 27 ‘Buy’, 1 ‘Overweight’, and 4 ‘Hold’ recommendations. No analysts are recommending that shareholders close positions and move to the sidelines. Price targets currently range from a low of $75 to a Street-high $165 while the stock is set to open Monday’s session more than a point below the low target. Worse yet, this target has acted as an impenetrable price ceiling for the last seven weeks.

Micron Technology stalled less than a point below 2000’s all-time high at 97.50 in April and entered a steep correction that pierced the 200-day moving average in the 70s in August. The stock has traded below that barrier since that time but signs of accumulation should limit downside in coming weeks, regardless of this week‘s metrics. In addition, a monthly Stochastics sell cycle is finally approaching the oversold level, predicting fourth quarter bottoming action.

For a look at all of today’s economic events, check out our economic calendar.

Disclosure: the author held no positions in aforementioned securities at the time of publication. 

Micron’s Earnings to More Than Double in Q4, Revenue to Jump Over 30%

The world’s leading semiconductor manufacturer, Micron Technology, is expected to report its fiscal fourth-quarter earnings of $2.33 per share, representing year-over-year growth of more than 115% from $1.08 per share seen in the same quarter a year ago.

The semiconductor company is expected to post revenue growth of over 30% to around $8.2 billion from a year earlier.

According to ZACKS Research, for the fiscal fourth quarter, the company forecasts revenues of $8.2 billion (+/- $200 million). Micron expects a non-GAAP gross margin of 47% (+/-100bps) for its fiscal fourth quarter. Non-GAAP operating expenses are likely to reach $900 million (+/-$25 million). The adjusted earnings per share are expected to be $2.30 (+/-10 cents).

Micron Technology shares closed nearly flat at $74.05 on Friday.

Analyst Comments

“While the underlying demand trends are strong and producer inventory levels are low heading into a period of seasonal strength, there are some signs of inventory adjustments short term after customers-built inventory,” noted Joseph Moore, Equity Analyst at Morgan Stanley.

“We see demand growth on the back of seasonality, memory elasticity/higher content per unit, and low customer inventories, and very slow supply growth in DRAM given declines in capex. We continue to believe that memory stocks have a relatively well-defined earnings cycle, though highs and lows are likely to be better than they have been historically.”

Micron Technology Stock Price Forecast

Twenty-one analysts who offered stock ratings for Micron Technology in the last three months forecast the average price in 12 months of $109.41 with a high forecast of $165.00 and a low forecast of $75.00.

The average price target represents a 47.75% change from the last price of $74.05. From those 21 analysts, 16 rated “Buy”, five rated “Hold” while none rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $75 with a high of $120 under a bull scenario and $40 under the worst-case scenario. The firm gave an “Equal-weight” rating on the semiconductor manufacturer’s stock.

Several other analysts have also updated their stock outlook. BMO slashed the price target to $105 from $110. Mizuho cut the target price to $97 from $107. JPMorgan lowered the target price to $100 from $140.

Check out FX Empire’s earnings calendar

Earnings Week Ahead: IHS Markit, Micron, CarMax and Bed Bath & Beyond in Focus

Earnings Calendar For The Week Of September 27

Monday (September 27)

Ticker Company EPS Forecast
HRB H&R Block -$0.34

Tuesday (September 28)

IN THE SPOTLIGHT: IHS MARKIT, MICRON TECHNOLOGY

IHS MARKIT: The leading provider of data and analytics to corporate is expected to report its fiscal third-quarter earnings of $0.83 per share, which represents a year-over-year decline of about 8% from $0.77 per share seen in the same period a year ago.

The company is expected to post revenue growth of over 9% to $1.17 billion. According to ZACKS Research, in all of the company’s last four quarters, earnings surpassed the consensus estimate. Earnings surprise has averaged 5.4% over its trailing four quarters.

IHS Markit is a leading supplier of information services across multiple verticals with an attractive business model. We believe the synergy potential with SPGI will lead to cost savings and access to underpenetrated revenue markets,” noted Toni Kaplan, equity analyst at Morgan Stanley.

“Recovery in auto sales from COVID-19 is occurring faster than previously anticipated. We expect the energy market to become more accommodative in ’21 and ’22 following the crude oil price rebound.”

MICRON TECHNOLOGY: The world’s leading semiconductor manufacturer is expected to report its fiscal fourth-quarter earnings of $2.33 per share, representing year-over-year growth of more than 115% from $1.08 per share seen in the same quarter a year ago.

The semiconductor company is expected to post revenue growth of over 30% to around $8.2 billion from a year earlier.

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE SEPTEMBER 28

Ticker Company EPS Forecast
SMIN Smiths £39.71
INFO IHS Markit Ltd $0.83
SNX SYNNEX $2.03
THO Thor Industries $2.98
UNFI United Natural Foods $0.80
MU Micron Technology $2.33

Wednesday (September 29)

Ticker Company EPS Forecast
JBL Jabil Circuit $1.38
CTAS Cintas $2.75
WOR Worthington Industries $1.86
MLHR Herman Miller $0.54
NXT NEXT £37.38

Thursday (September 30)

IN THE SPOTLIGHT: CARMAX, BED BATH & BEYOND

CARMAX: The United States’ largest used-car retailer is expected to report its fiscal second-quarter earnings of $1.85 per share, which represents year-over-year growth of over 3% from $1.79 per share seen in the same period a year ago.

The Goochland County-based used car giant would post year-over-year revenue growth of over 28% to $7.0 billion.

BED BATH & BEYOND: The U.S.-based merchandise retailer is expected to report its fiscal second-quarter earnings of $0.52 per share, which represents year-over-year growth of around 4% from $0.50 per share seen in the same period a year ago.

The company that operates many stores in the United States, Canada, Mexico, and Australia would see a revenue decline of about 23% to around $2.5 billion.

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE SEPTEMBER 30

Ticker Company EPS Forecast
KMX CarMax $1.85
MKC McCormick $0.73
PAYX Paychex $0.80
BBBY Bed Bath & Beyond Inc. $0.52

Friday (October 1)

No major earnings are scheduled for release.

Micron at Cusp of Major Downtrend

The tide has turned against Micron Technology Inc. (MU) in recent weeks, raising odds the memory chipmaker will trade at much lower levels in coming months. Long-term resistance, downgrades, and predictions that DRAM prices soften in the second half have weighed on second quarter price action, dumping the stock more than 20% since April’s 21-year high. More importantly, it’s now reached a support level that bulls need to hold at all costs.

Softening Chip Prices

The stock roared to higher ground in 2020, posting a 40% annual return in reaction to firming prices for all sorts of memory chips. It continued to gain ground in the first quarter of 2021, with chip shortages all across the world keeping a floor under prices. However, analysts now worry that prices will drop in the second half as supply ramps up and meets demand, potentially returning Micron to its long-term status as an on-again off-again cyclical play.

Cleveland Research downgraded Micron to ‘Neutral’ last week, with analyst Chandler Converse predicting that Q3 DRAM ASPs will end up “lower than expected” and that Q4 may be “flat to down”. However, he’s looking for higher NAND ASP prices due to “controller shortages and a lower inventory build among customers compared to DRAM.” Even so, it will be hard to sustain the highest stock price in more than two decades when a key revenue driver loses altitude.

Wall Street and Technical Outlook

Wall Street consensus is still riding the bull train, with a ‘Buy’ rating based upon 25 ‘Buy’ and 6 ‘Hold’ recommendations. No analysts are recommending that shareholders close positions and move to the sidelines. Price targets currently range from a low of $90 to a Street-high $172 while the stock is set to open Tuesday’s session more than $12 below the low target. This major disconnect indicates that Main Street investors believe the current price is unsustainable.

Micron sold off from 97.50 to 1.59 between 2000 and 2008, finally turning higher into the new decade. It spent another decade or so carving a 5-wave rally pattern that stalled within 54-cents of the Net bubble high in April 2021. That high marks major resistance, often taking months or years to overcome. The stock has lost ground since that time, reaching 200-day moving average support this week. A breakdown is likely, given active monthly and weekly sell cycles.

For a look at all of today’s economic events, check out our economic calendar.

Disclosure: the author held no positions in aforementioned securities at the time of publication. 

Why Shares Of Micron Are Up By 5% Today?

Micron Video 01.04.21.

Micron Stock Gains Ground After Strong Quarterly Report

Shares of Micron gained strong upside momentum and moved closer to all-time high levels after the company provided its quarterly report.

Micron reported revenue of $6.24 billion and adjusted earnings of $0.98 per share, beating analyst estimates on both earnings and revenue. The company’s operating cash flow totaled $3.06 billion compared to $1.97 billion in the previous quarter.

In the next quarter, Micron expects to report revenue of $7.1 billion and adjusted earnings of $1.62 per share. The company’s guidance looks strong which is not surprising given the current market situation in the semiconductors segment. The world is suffering from a shortage of chips, which is a bullish development for Micron.

What’s Next For Micron?

The market situation remains favorable for Micron and other companies in the semiconductor space. Coronavirus pandemic has boosted demand for chips, while the increased demand from the auto industry supported the upside trend.

The market remains tight, and it remains to be seen whether producers will be able to ramp up supply significantly in the near term. Meanwhile, Micron will benefit from both strong demand and higher prices for its production.

Analyst estimates for Micron earnings have increased significantly in the recent months. Currently, analysts expect that the company will report earnings of $4.85 per share for the financial year 2021. For the financial year 2022, Micron is projected to report earnings of $9.41 per share so the stock is trading at less than 10 forward P/E which is cheap by modern market standards.

In this light, Micron shares have a good opportunity to develop additional upside momentum in the upcoming weeks. If Treasury yields continue their current pullback and more further away from recent highs, tech stocks will get more support, and Micron stock will have a chance to test all-time high levels at $97.50 which were reached back in 2000.

For a look at all of today’s economic events, check out our economic calendar.

Chipmaker Micron’s Earnings to More Than Double in Q2; Target Price $115

Micron Technology, one of the world’s leading semiconductor manufacturers, is expected to report its fiscal second-quarter earnings of $0.93 per share on Wednesday, representing year-over-year growth of more than 106% from $0.45 per share seen in the same quarter a year ago.

The semiconductor company is expected to post revenue growth of about 30% year-on-year to around $6.2 billion. In the last four consecutive quarters, on average, the company has delivered an earnings surprise of over 10%.

Micron shares, which surged about 40% in 2020, traded 1.4% lower at $86.77 on Monday. But the stock rose over 15% so far this year.

Analyst Comments

“We expect this to be a good quarter, though enthusiasm over sharp increases in pc and server pricing should be tempered by smaller increases elsewhere, and potential supply constraints in the May quarter; still, we would expect our EPS to increase. Remain Overweight with $105 price target,” noted Joseph Moore, equity analyst at Morgan Stanley.

“We expect DRAM pricing to inflect in 2021 as inventories normalize and demand returns. We alter our price assumptions and now expect stronger pricing for both NAND and DRAM in the May quarter. We see demand growth on the back of seasonality, memory elasticity/higher content per unit, and low customer inventories, and very slow supply growth in DRAM given declines in capex. We continue to believe that memory stocks have a relatively well-defined earnings cycle, though highs and lows are likely to be better than they have been historically.”

Micron Stock Price Forecast

Twenty-six analysts who offered stock ratings for Micron in the last three months forecast the average price in 12 months of $115.59 with a high forecast of $150.00 and a low forecast of $90.00.

The average price target represents a 33.35% increase from the last price of $86.68. Of those 26 analysts, 23 rated “Buy”, three rated “Hold” while none rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $105 with a high of $140 under a bull scenario and $40 under the worst-case scenario. The firm gave an “Overweight” rating on the semiconductor makers’ stock.

Several other analysts have also updated their stock outlook. Susquehanna raised the stock price forecast to $145 from $135. BMO upped the target price to $90 from $80. Citigroup lifted the price target to $130 from $116. UBS raised the price objective to $120 from $110. Needham upped the target price to $115 from $100.

Moreover, Rosenblatt Securities increased the target price to $150 from $120. JP Morgan lifted the price target to $130 from $100. Piper Sandler upped the stock price forecast to $90 from $80.

Check out FX Empire’s earnings calendar

The Three Pillars for Stocks

We’re officially almost through with the first quarter of 2021. While a broad correction did not happen by now, as I thought, the Nasdaq dipped into correction territory twice.

There might also be as much uncertainty for tech stocks today as there was at March’s start.

However, let’s look at the big picture almost a week after we hit the 1-year anniversary of the market’s bottom. Three pillars remain in motion as a strong backdrop for stocks:

  1. Vaccines
  2. Dovish monetary policy full of stimulus
  3. Financial aid

While the major indices are still positive for 2021, every month this year has been marked by hot starts, marred by mid-month uncertainty and downturns. We’re dealing with rising bond yields, inflation scares, volatile Reddit trades, and an improving yet slowing labor market recovery.

Plus, although earnings came in strong this past quarter, stock valuations are still at an overly inflated point not seen in years. In fact, Ray Dalio , founder of the world’s largest hedge fund, Bridgewater Associates, says there’s a bubble that’s ‘halfway’ to the magnitude of 1929 or 2000.

We could see some more volatility on tap this week as the market continues to figure itself out.

  1. Suez Canal- There’s been a gigantic tanker blocking arguably one of the most crucial waterways for global trade for the last 6 days. There are indications that the tanker may be on the way to being freed. But the sooner this happens, the better. The Suez Cana controls about 10% of global trade, so you can only imagine the hundreds of billions of dollars bleeding per day the more this drags on.
  2. Economic Data- Consumer Confidence, the March job’s report, the unemployment rate, and the PMI Manufacturing index will be released this week.
  3. Earnings- Chewy (CHWY) will report Tuesday (Mar. 30) after market close, and Walgreens Boots Alliance (WBA), Dave & Busters (PLAY), Micron (MU) will all report after market close Wednesday (Mar. 31).

My goal for these updates is to educate you, give you ideas, and help you manage money like I did when I was pressing the buy and sell buttons for $600+ million in assets. I left that career to pursue one to help people who needed help instead of the ultra-high net worth.

With that said, to sum it up:

Over a year after we bottomed, there is optimism but signs of concern.

The market has to figure itself out. More volatility is likely, and we could experience more muted gains than what we’ve known over the last year. Inflation and interest-rate worries should be the primary tailwind. However, a decline above ~20%, leading to a bear market, appears unlikely to happen any time soon.

Hopefully, you find my insights enlightening. I welcome your thoughts and questions and wish you the best of luck.

Russell 2000 – Time to Pounce?

Figure 1- iShares Russell 2000 ETF (IWM)

I kicked myself for not calling BUY on the Russell after seeing a minor downturn during the second half of February. I wasn’t going to make that mistake again.

After the iShares Russell 2000 ETF (IWM) went on its latest rally to start March, I checked out the chart. I noticed that almost every time it touched or minorly declined below its 50-day moving average, it reversed.

Excluding the recovery in April from last year’s crash, 5 out of the previous 6 times the Russell did this with its 50-day, it saw a sharp reversal. The only time it didn’t was in October 2020, when the distance between its 50-day and its 200-day moving average was a lot more narrow.

Fast forward to Tuesday (Mar. 23). The Russell 2000 saw its worst day since February 25, dropped below its 50-day, and I switched the call to a BUY.

Now, as we start the final week in March, we may be looking at the 6th reversal after dipping below its 50-day. The IWM has been up about 4.25% since March 24.

Aggressive stimulus, friendly policies, and a reopening world bode well for small-caps in 2021. I think this is something you have to consider for the Russell 2000 and maybe overpay for.

Based on the RSI and where we are in relation to the 50-day moving average, I still feel that this is a BUY.

For more of my thoughts on the market, such as tech, inflation fears, and why I love emerging market opportunities, sign up for my premium analysis today.

Thank you for reading today’s free analysis. I encourage you to sign up for our daily newsletter – it’s absolutely free and if you don’t like it, you can unsubscribe with just 2 clicks. If you sign up today, you’ll also get 7 days of free access to the premium daily Stock Trading Alerts as well as our other Alerts. Sign up for the free newsletter today!

For a look at all of today’s economic events, check out our economic calendar.

Thank you.

Matthew Levy, CFA
Stock Trading Strategist
Sunshine Profits: Effective Investment through Diligence & Care

* * * * *

All essays, research, and information found above represent analyses and opinions of Matthew Levy, CFA and Sunshine Profits’ associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Matthew Levy, CFA, and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Levy is not a Registered Securities Advisor. By reading Matthew Levy, CFA’s reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading, and speculation in any financial markets may involve high risk of loss. Matthew Levy, CFA, Sunshine Profits’ employees, and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.