With Wall Street going wild for anything remotely associated with artificial intelligence, it’s time to add another name to the list: computer memory and storage products specialist Micron (NASDAQ:MU). While it’s not delivering the performance of Nvidia (NASDAQ:NVDA) or Super Micro Computer (NASDAQ:SMCI), MU stock has been a hot commodity, gaining over 55% year to date. It could get even hotter.
Recently, Bank of America Securities analyst Vivek Arya assigned a “buy” rating on MU stock along with a price target of $144. The analyst believes that the security could soar on surging demand for AI. Thanks to Micron’s high-bandwidth memory (HBM) chip technology, it could help feed the increasingly intense demands of smart technologies.
Additionally, Arya believes that Micron is in an excellent position to increase its market share of the HBM sector from less than 5% to the mid-20% range. According to Mordor Intelligence, the HBM space may reach a valuation of $2.52 billion this year. By 2029, it could hit $7.95 billion, representing a compound annual growth rate (CAGR) of 25.86%.
Micron Might Benefit from a ‘Whole Number’ Approach
Moving onto the technical arena, MU stock closed the Wednesday session at $128.01. During afterhours trading, shares gained more than 1%, moving the price tag to $129.49. Based on the “whole number” concept, it’s possible that the bulls will aim to push shares to $130.
Interestingly, the market tends to move tradable assets toward round numbers. The more important levels – such as $130 – could experience significant activity. It may stem from the psychological satisfaction we humans see from “clean” numbers.
Now, we’re not here to add to the psychological research but rather to use this knowledge to our advantage. Indeed, many other trading systems have noted this phenomenon and use it to draft profitable tactics. Therefore, the market will almost surely drive MU stock to the next biggest “clean” number, which is $130.
Even more compelling, it’s possible that the optimists will try to push MU stock to $140. Looking at Barchart’s Trader’s Cheat Sheet, we see significant resistance barriers running from $130.42 to $137.93. It won’t be an easy ride to $140, that’s for sure. However, if the last resistance line at $137.93 falls, it could be game on for the bulls.
Trade of the Day: Buy MU Stock Call Options
With MU stock, there are two clear opportunities available. One is a near-term wager that Micron will reach $130. My idea would be to consider the 12 April 2024 $130 call, which closed at a premium of $2.90 on Wednesday. Here, the bid-ask spread as represented by the midpoint price is relatively narrow at 2.09%. That’s likely because of the huge volume influx.
Another idea for longer-term speculation is to consider the 19 July 2024 $140 call. Here, the premium stands at $9 due to the much-longer period till expiration. However, the spread is only 1.08%, which is enticing. Given how fast AI-related enterprises have soared over the past year or so, it shouldn’t take too long for MU stock to reach for this milestone price.
Granted, it’s a higher-risk proposition. But with so much passion for digital intelligence, MU stock should be on your radar.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
