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I continue to believe that the market should rally until at least mid-January. The major indices ended mildly higher yesterday despite an announcement from the European Central Bank (ECB) that it would slow the pace of its asset-purchase program while extending its overall duration by nine months.
European banks, in particular Italy’s Monte Paschi, are struggling. The bank just recently asked the ECB for additional time to raise the capital it needs to avoid a government bailout and, while government officials are reluctant to accept the unpopular position and provide a bailout, I cannot see a scenario where they would allow the bank to fail.
The U.S. stock market looks overvalued and overbought right now, but the last thing we want to do is try to buck the tape. Tech in particular is offering some opportunities. This should be a good season for the sector, with companies doing lots of tech purchasing. And techs have not really participated in this rally, so they still have room to run. For that reason, today I’m recommending a bullish trade on Micron Technology, Inc. (NASDAQ:MU).
Buy to open the MU Apr 23 Calls (MU170421C00023000) at $1.35 or lower.
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