MU - TA confirming transition to secular growth story?

Aug 28, 2018

For the past year, Micron executives have been making the case that the memory industry is transitioning from a cyclical industry with booms and busts to a secular growth industry with the massive demand for memory in the cloud, artificial intelligence, self driving cars and IOT ramping and reshaping the compute needs of the future. It is a nice story and one MU would obviously benefit from crafting, but is it true? It seems over the past year that Wall Street has been hot and cold on Micron, which has seen high volatility during this period. This price action tells me not everyone is on board with the secular growth transition thesis offered by Micron management.

What I'm seeing in the chart is showing me management's thesis is about to be proved. How can I make such a claim? The answer is Elliot Wave analysis. the MU chart is a textbook example of a flat correction signaling the end of the previous cycle and the continuation of a cycle of higher degree. Simply put, MU will rally strongly higher for an extended period of time. Yes there will be minor corrections along the way, but an entry here could make for an excellent long-term investment of 2 - 5+ years.

Now, I direct your attention to the MU Chart and compare it with the "textbook" Elliot Wave flat correction. As you can see, the wave count, direction and magnitude of the subwaves is almost a perfect fit for a flat correction. The question now is what type of flat is MU exiting?

So far, it seems like a running flat as the tops were pretty close to each other ($1.15 or 1.8%) and wave v that just finished, is almost the same as the first C wave down ($0.23 or 0.51%). The strong move up from the recent low indicates that wave 1 of the next, 5-wave up move is begining. To confirm this, MU needs to break the downtrend resistance line I have drawn in purple. The danger here, is that if it fails, it could form a lower-low creating a regular flat / expanded flat pattern, invalidating the recent up-move as the start of wave 1.

Either way, MU is poised to confirm the next up-trend. It's a matter of getting the entry correct. If it does break the resistance to the up-side, the last 5-wave growth cycle lasted 665 days, which gives a target for the next series of motive, or growth waves. Further, the next move up, will be wave 3 of the next cycle degree, indicating that MU may enjoy mostly steady growth for the next 3.5 to 5+ years as the third though fifth waves complete. To me, this signals the end of the cyclical era of the stock with the severe long-term volatility and a more sustainable growth pattern.

Aug 28, 2018

Note

For your reference, the textbook Elliot wave is here: elliottwave-forecast.com/elliottwave/three-types-of-elliott-wave-flats-2/

and I put them side by side here: i63.tinypic.com/2dl3n0k.png

Aug 29, 2018

Note

I realized I got so caught up in the wave analysis I didn't provide a price target for the next level.

Using the 1.618 Fibonacci extension from the previous the lows the the wave 5 high, indicates that the next, intermediate price target is $101.50 before a correction to about $80 (.382 of wave 3) and then a final fifth wave even higher, with a conservative price target of $118.50 (0.618 of wave 1, placed from the wave 4 bottom). Again this whole structure will take years to develop and the waves can easily extend well beyond these price targets. This is just the "standard" Fibonacci relationships. Care must be taken to monitor the next waves while they are in progress and I will try to provide updates here if this starts coming into play.

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As always, the responsibility for managing your position is your own. I am not a financial adviser nor is any content in this post intended to be financial advice. The information presented is my opinion, based on tools I have learned from others sharing their opinions and my experience in the markets. I share these ideas to generate discussion and have others critique my analysis because, as always, I am still learning. With that in mind, the outcome could be quite different than what I am predicting and this is for entertainment purposes only. It should not be considered financial or investment advice of any kind. Readers should consult with a financial or investment professional to determine what may be best for their individual needs.