Micron (MU) shares have been on quite a run as they head into Wednesday afternoon’s earnings report. The stock is up nearly 180% year to date and made a new 52-week high just last week when it traded as high as $264.75. From that recent peak, shares have fallen over 10%, and traders hope earnings can stem the selling pressure. However, even solid earnings haven’t been a major upside catalyst. The stock has traded lower after the company posted solid results over the last four quarters and five of the last six. So, what’s changed? Fundamentally, the stock continues to crush it on all metrics. AI-driven memory demand remains its core tail wind. The company has experienced record revenue growth, substantial margin improvement and continues to post strong earnings and guidance. However, sentiment has soured dramatically. Look no further than the price action in Meta and Oracle . There is a new distrust when it comes to capex spending and debt issuance. Justifiably or not, that distrust has spread throughout many of the high-flying tech names. Investors are selling first and rotating into safer havens now. In the case of Micron, look specifically at results and the reaction to the two giants in the semiconductor space — Nvidia and Broadcom . Both had solid quarters and guides. There were no alarm bells of concern, yet the price failed to go higher. When Nvidia and Broadcom reported, the initial reaction after hours in each stock was a rally, but sentiment changed and price reversed. Broadcom was also trading at new all-time highs on Dec. 10. Now it has suffered a nearly 20% correction. The fundamentals don’t justify it, but the technicals show a breakdown and the trend has changed. Like it or not, these stocks are in the penalty box for now as they try to regain footing, and Micron may be dragged into it with them — solid results or not. Let’s examine the chart. Technically, shares have had a dramatic rise. They are 36% above the 200-day moving average after peaking at 44% above it last week. That move is historically overextended and is likely to revert closer to the mean. We are also looking at a stock that is losing momentum. Its relative strength index is showing a bearish divergence, meaning the trend is tiring. It is breaking the 50 midline, which is a sell signal as well. Looking at stochastics, traders had a clear sell signal coming into the week. Shares reached overbought conditions and continue in their corrective phase. Near term, expect the 50-day moving average to be tested at $224. If the price can hold at this level, then a new trend back toward $240 could begin. The more likely scenario is that it doesn’t. As we’ve seen in its peers NVDA and AVGO — the corrections have been more severe and new lower levels of support have been formed. A drop to $200 in the case of Micron could be the next technical level to get back into the name. For now, the risk/reward still favors taking profits and sitting out this earnings report. DISCLOSURES: None. All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, NBC UNIVERSAL, their parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL’S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.
