Nasdaq 100 Price Forecast: Semiconductor Stocks Look to Micron Earnings

Nasdaq 100 Price Forecast:

• The Nasdaq 100 clawed its way back above technical resistance on Wednesday after impeachment fears pressured it to the lowest level Since September 3
• On the back of encouraging trade war comments from US President Trump, risk appetite recovered
• Like Nike’s earnings on Tuesday, Micron’s quarterly report due Thursday may offer valuable trade war insight and could sway the entire Nasdaq

Nasdaq 100 Price Forecast: Semiconductor Stocks Look to Micron Earnings

As markets grapple with fluctuating impeachment odds for President Trump, risk appetite has reacted accordingly. While initially bearish, Wednesday’s price action would suggest market participants are comfortable with the political landscape and will again turn to factors like monetary policy, trade wars and corporate earnings. That said, Thursday will see the release of valuable insight for both trade war-watchers and volatility seekers with Micron (MU) scheduled to reveal its quarterly earnings.

Deriving more than 55% of total sales from China, Micron is particularly vulnerable to the US-China trade war. Further, the company sourced 13% of their revenue from Huawei in the first half of the year – an entity that has been blacklisted by the United States. In June, however, Micron CEO Sanjay Mehrotra revealed the company found a workaround to a subset of their Huawei-bound exports and was able to handily beat their quarterly expectations which saw MU shares surge. That said, MU investors will be eager to see if Micron executives were able to work another miracle and successfully combat the headwinds brought about by the US-China trade war.

Either way, the event is poised to be a volatile one. With an earnings implied volatility of 8.16%, MU shares could swing as high as $53, or as low as $45. Further, implied volatility heading into Thursday’s report is above the average move for Micron after earnings - slightly below 7% - which could suggest heightened uncertainty. In turn, a strong showing could give rise to improved sentiment for the trade war-battered semiconductor stock.

Micron Stock Price Chart: Daily Time Frame (November 2016 – September 2019)

A bullish reaction could see bulls drive MU shares above nearby resistance that resides slightly beneath $51 and coincides with recent highs. Such a move would allow the stock to target secondary resistance around $53.75 in the event of a bullish follow-through. If, on the other hand, Micron executives are unable to navigate the perils of the US-China trade war, MU shares may look to revisit nearby support at the $46.50 and $45 levels – but longer-term sentiment would likely be dealt a damaging blow.

Given the stock’s implied volatility and presence in the semiconductor sector, a significant move either way could work to sway the entire Nasdaq. If there is any indication the semiconductor market is suffering from demand concerns or over-supply, expect MU peers to undergo a bearish price reassessment with the Nasdaq likely to follow. Until then, follow @PeterHanksFX on Twitter for further updates and analysis.

--Written by Peter Hanks, Junior Analyst for DailyFX.com

Contact and follow Peter on Twitter @PeterHanksFX

Read more: Dow Jones Forecast: Nike Earnings to Deliver Trade War & Retailer Insight