Technology stocks continue to dominate the landscape. But it’s not just about the race to $1,000 by twin behemoths Amazon.com, Inc. (NASDAQ:AMZN) and Alphabet Inc (NASDAQ:GOOG, NASDAQ:GOOGL). A less reported, yet equally important theme, is that of semiconductor supremacy, as Micron Technology, Inc. (NASDAQ:MU) finds itself locked in one of the strongest uptrends on the street.
Since its late-March launch to a new 52-week high on the back of a beautiful earnings beat, MU has spent the past two months in base-building mode. The lengthy churn has allowed the stock to digest its gains and work through overbought conditions.
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With the 50-day and 20-day moving averages now caught up and Micron Technology stock testing the upper end of its trading range, it appears a breakout is at hand. Watch for MU to rise above $29.85 to confirm in the coming days.
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In forecasting where the mighty Micron could go, we can look to the next major resistance level, which is easily spotted on a weekly chart.
The $33 zone that halted the stock’s advance back in 2015 is as good a target as any over the coming weeks and months.
How to Build an MU Options Trade
In sizing up the options market, we often look to implied volatility (IV) readings for clues regarding whether option contracts are cheap or expensive. With an IV Rank of 21% (not shown), Micron options currently sit on the cheaper end of the spectrum, making a long option play appealing.
Rather than buying calls outright, we’ll hedge our bet by doing a calendar spread. The trade consists of buying a longer-term call option while selling a shorter-term call option.
Buy the July $28 call while selling the June $30.50 call for a net debit of $2.15. The max loss is limited to the initial cost and will be lost if MU stock sits below $28 at July expiration.
The best case scenario for the trade is to have Micron rise to $30.50 by June expiration, which is about three weeks away. Even if it rallies past that, the spread will still yield a profit. If you can capture a gain of $40 or higher per spread, consider exiting.
As of this writing, Tyler Craig did not hold a position in any of the aforementioned securities.
