The trading week started off strong for memory specialist Micron Technology (NASDAQ:MU). Shares jumped 3.67% following an upbeat Goldman Sachs note which raised MU stock from neutral to buy and lifted the price target on shares from $40 to $56. The firm cited faster-than-expected shrinking NAND inventories and improved supply versus demand balance.
Micron’s management discussed improving inventories last month when the company forecasted strong sequential growth for its fourth quarter. Nevertheless, with Goldman Sachs on board and adding a bit more clarity on the bullish market dynamics for the company, MU stock bulls should be optimistic about the future.
This strategist agrees with Goldman Sachs bullish assessment. It’s not too late to go long MU stock today for big upside potential tomorrow and beyond. Let me explain.
MU Stock Monthly Price Chart
The price chart also supports being bullish on MU stock. Shares have spent the better part of around 15 months building a healthy-looking corrective base that’s worthy of propelling Micron higher. Now, with MU stock marginally above the 50% retracement level from 2018’s highs, shares are well positioned for this price discovery to begin. But there’s more reasons to be bullish too.
As the provided monthly chart reflects, the latest price action has also just confirmed a fresh higher high for MU stock after establishing a 28% corrective higher low pivot in June. Micron is also within a handful of percentage points from a second price cross of its 50% retracement level dating back to the share’s July 2000 high of $97.50. Combined with a supportive-looking stochastics set-up signaling a bullish crossover from oversold levels, buying what Goldman is selling makes even more sense on the price chart.
Trading MU Stock
I’d recommend buying MU stock today given the preponderance of bullish technical supports. But with MU stock also a volatile name, be prepared to reduce position size to allow for a bit more wiggle room within the emerging bullish trend.
In the event our outlook is wrong, a suggested stop-loss for this long Micron position is below $41.50. This strategy is a blended technical and percent-based method to control risk. It contains exposure to 12% and gives the right side of the base some needed leeway, but smartly exits before a full-blown breakdown of MU stock.
If we’re correct about Micron heading aggressively higher, I’d recommend taking partial profits as shares challenge an area in-between the 62% retracement level and last year’s high of $64.66.
The initial upside target trumps Goldman’s price estimate of $56 by about 9% to 15%. That’s optimistic of course. Further, the expectation is a MU stock rally of this magnitude could reasonably play out over the next 3 to 6 months given the structure of the existing monthly base and much faster than the broker’s 12-month price target.
Disclosure: Investment accounts under Christopher Tyler’s management currently own positions in Micron (MU) and its derivatives but no other securities mentioned in this article. 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 options-based strategies, related musings or to ask a question, you can find and follow Chris on Twitter @Options_CAT and StockTwits.