Ride the Micron Technology, Inc. (MU) Stock Bucking Bull

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Micron Technology, Inc. (NASDAQ:MU) has proved less a tiger and more of a bucking bull the last several weeks. But for investors willing to hold on for a ride, MU stock is looking good — and an options spread, the gear of choice for safer passage. Let me explain.

MU Stock: Ride the Micron Technology, Inc. (MU) Stock Bucking Bull

MU stock has been called a tiger that needs to be ridden by CNBC’s Mad Money host James Cramer. His point at the time was that Micron was just entering a new cyclical bull market.

But that’s not to suggest MU stock can’t strike back at times at investors due to known volatility in MU stock’s end markets, as well as on the price chart.

Personally, I liked Cramer’s overall bullish narrative for Micron, though in hindsight I’d call MU stock more of a bucking bull than a tiger. But more on that in moment.

The fact is the company’s late March Q2 earnings confessional has reaffirmed a boom cycle for Micron is here. And he’s not alone in thinking that either. Following its sizzling Q2 results and above-views outlook, Wall Street is definitely on board too with MU stock going higher.

Analyst support is showing a median gain of 29% to $38 a share over the next 12 months based on 27 estimates. At the same time, range views are also definitely skewed for upside with a low target of $30 and high of $60! And actual ratings on Micron are also unequivocally bullish with 25 buys, two outperforms and five holds.

So, what’s not to like, right? Not much in our opinion, and even less right now. However, given the ride of late, I can’t say MU stock is about to change its stripes either.

Micron Daily Chart

Source: Charts by TradingView

If timing is everything, then my last bullish write-up could not have been more off-the-mark. An article at InvestorPlace published on April 10 and denoted by the yellow oval on the MU stock chart definitely brings that point home.

The incorrect observation was MU was setting itself up as a smallish, high-level double-bottom on the heels of a constructive-looking earnings reaction. What actually transpired is that a much larger and possibly more durable base has developed.

At two months in length and a corrective depth of 12%, the new pattern is an interesting possibility to consider, in of itself. But with another smallish double-bottom that filled Micron’s earnings gap and the formation now sporting a higher low pivot—it appears even more so as it has the earmarks of a very constructive and bullish “W” style base.

No doubt, investors in MU stock have been treated to something akin to riding a bucking bull as the larger base has been built. The latest incident in our view is the higher low pivot from last week. To be honest, the price action looked fairly hostile for those holding shares. Nonetheless, Micron shares did reverse aggressively higher and are now firmly back above the 50-day simple moving average, as well as bullishly situated above the 62% retracement level.

Looking forward, a move in MU stock through key base pivots of $29.42 and $29.87 should offer a nice breakout opportunity and reassertion of Micron’s bullish trend and an eventual challenge of Micron’s intermediate high of $36.59 from December 2014.

MU Stock Bull Call Spread

Despite the poor initial timing back in April, the strategy offered that day is still very appealing, still very much alive and slightly more affordable, with the passage of time trumping marginally higher prices in MU stock.

Specifically, the July $31/$34 bull call spread looks like an attractive way for bullish traders to participate in MU in lieu of owning shares. With the stock at $28.99, the vertical is priced for 65 cents and offers a max return of 360% or $2.35 if MU stock can rally 17% through July expiration.

While there’s less time for this type of move to occur, an earnings event in late June and a couple extra weeks on the clock of the July contract does allow ample opportunity for a bullish reaction and follow-through above $34, should MU stock continue its bucking bull performance.

Investment accounts under Christopher Tyler’s management currently own positions in MU stock and its derivatives. The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT.

The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.


Article printed from InvestorPlace Media, https://investorplace.com/2017/05/micron-technology-inc-mu-stock-bucking/.

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