Micron Technology's stock price has hit an extreme technical milestone, with its current deviation from the long-term trend line surpassing the peak levels seen during the dot-com bubble and the Windows 95 frenzy; historical data indicates this signal has often preceded significant corrections. Micron has experienced a parabolic rise in recent months, recording its largest monthly gain since February 2000 this past January—right before the dot-com bubble burst. AI-driven supply shortages and surging demand are pushing prices and profits higher for Micron and other memory companies. On Monday, Micron's stock surged 5.5%, marking its fourth record close in the past five trading sessions and its 13th new all-time high this year. Wall Street's enthusiasm is palpable, with a FactSet survey showing 88% of analysts maintain a bullish outlook on the stock. However, technical analysts are flashing warning signals. BTIG technical analyst Jonathan Krinsky pointed out that Micron's stock is in a state of "historic overbought" conditions, with its deviation from the 200-day moving average reaching a record high; on the two previous occasions it approached current levels, the stock subsequently entered a bear market.
Technical Indicators Flash Red Currently, Micron's stock price is 147% above its 200-day moving average, slightly below the record high of 152% set on January 28. This widely-used long-term trend-following indicator shows the stock has far exceeded historical extreme ranges. For comparison, at the peak of the dot-com bubble in early 2000, this deviation reached a maximum of only 98%. When Micron's stock peaked on July 14, 2000, the deviation was 89%. Subsequently, the stock plummeted 65% within three months and was still down 62% after 12 months.
The previous record occurred on September 11, 1995, when the deviation was 124%. At that time, Micron's stock soared following Microsoft's release of Windows 95, as the new operating system sparked robust demand for memory chips, leading to supply shortages and driving up prices and profits—a scenario strikingly similar to the current AI boom. Following that peak, the stock fell 42% after three months and crashed 77% after 12 months.
Strong Fundamentals Cannot Fully Mask Valuation Risks Micron's current rally is indeed supported by solid fundamentals. Supply tightness and demand growth driven by AI applications are creating a favorable environment for the memory chip industry. This also explains why the vast majority of Wall Street analysts maintain optimistic forecasts. Nevertheless, technical analysts caution that despite strong fundamentals, extreme technical indicators suggest "the good news is already fully priced in." BTIG's Krinsky emphasized in a client report that investors should recognize current valuation levels already reflect all positive factors. Technical analysts often note that history does not simply repeat itself. In theory, Micron's stock price could deviate further from the 200-day moving average, or the deviation could narrow through a period of sideways consolidation—the average itself is currently rising by approximately $2 per day.
Historical Precedents Warrant Caution But for investors convinced that "this time is different," those holding the stock in July 2000 and September 1995 likely thought the same. Following both historical peaks, Micron's stock experienced substantial corrections, with declines reaching as high as 77%. While Micron's stock continues to hit new record highs amid buoyant market sentiment, the extreme deviation state indicated by technical indicators bears a strong resemblance to the conditions preceding two major historical corrections. Despite favorable fundamentals, the risk signals from a valuation perspective cannot be ignored. For investors holding Micron stock, it is prudent to recognize that, however strong the fundamentals may be, the current price likely already fully incorporates market expectations, potentially limiting the scope for further significant gains.
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