I’m Still Buying Micron Technology, Inc. — Here’s Why

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Where do we go from here? If we’re talking about Micron Technology, Inc. (NASDAQ:MU), it’s likely higher. But if you can’t stand price volatility in a notorious bucking bull of a stock, don’t short-change yourself with MU shares. Instead, use a limited-risk and modified options strategy to stay the course.

I'm Still Buying MU Stock -- Here's Why
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Micron killed it Tuesday night in delivering its Q4 corporate confessional. And if you’re one of those nay-saying bearish forecasters trying to time a cycle top in MU shares — bad news, the market in DRAM and NAND continues to fire on all cylinders.

It’s even better when investors embrace Micron’s grand slam performance punctuated by an easy profit and sales beat, rising margins and an above-views outlook from management.

Having said that, our opinion is MU remains a long and one supported by a still-building bull market within the memory manufacturer’s end markets. But as I’ll also continue to stress, positioning successfully in Micron means accepting the stock isn’t a one-way Street even when others, maybe like me, wholeheartedly agree.

MU Stock Weekly Chart


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Source: Charts by TradingView

And on the price chart of MU? For my part, let’s just say I continue to see the upside potential from a massive cup-shaped base of nearly three years in duration.

Could the quaint-looking pattern be a problem? Maybe. More important, our message remains one in which traders’ just need to be aware of Micron’s tendency to be a highly-volatile stock to hold onto.

Bottom-line, other traders can point out the possibility of a bearish double top and an overbought stochastics indicator as potential technical reasons to stay on the sidelines. However, I’m guessing most of those folks probably weren’t saying anything optimistic about MU in July either.

The MU Trade

A modified fence discussed bat the end of August is fully in-the-money based on Tuesday’s after-hours bid in MU and doing quite nicely for bullish investors. Priced for even money when shares were near $31.50, the limited-risk spread is in position to capture $1.00 at expiration if Micron stock can remain above $35.

For Wednesday, earnings reactions can always be tricky and that’s on top of MU’s sometimes ornery price behavior. Having said that and for like-minded MU bulls, if you’re looking to initiate a position, I still like using a modified fence.

One favored choice would be to sell the Nov $33/$32 put spread and purchase the $37/$38 call vertical as the combination should be priced for even money to a small credit.

If MU continues to do the right thing on the price chart and in spite of its volatility, above $38 at November expiration this trader will have a profit of $1 or better as the call spread goes fully in-the-money.

And if MU volatility turns ugly again? For bulls that like to buy on weakness, remember the position is fully-protected. This means in the event Micron shares tumbles below the put spread, it will only cost you about 3%. That means you’re in position to take advantage of an even more generous price chart.

Investment accounts under Christopher Tyler’s management currently own positions in Micron 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 and StockTwits and feel free to click here to learn more about how to design better positions using options!

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/2017/09/im-still-buying-mu-stock/.

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