Remember when investors were arguing that the technology sector was topping? Well, now that the Nasdaq has scored its eighth straight up day, that fear is nothing but a distant memory. If you’re a momentum lover, you’ll be pleased to hear that semiconductor stocks from Advanced Micro Devices, Inc. (NASDAQ:$AMD), Nvidia Corporation (NASDAQ:$NVDA), and Micron Technology, Inc. (NASDAQ:$MU) are on route to rehabilitation. Even though all three companies look promising, it’s Micron Technology’s stock that takes the cake.
Micron Technology Stock Charts
Don’t believe that Micron’s price trend is doing well? Just look at how it performed on the weekly chart below:
Right now, MU has one of the cleanest-looking, most well-mannered trends on the Street. In May of 2016, MU bottomed near $10. Since then, the stock has increased about 219%. Needless to say, that’s not bad for a year’s worth of work.
Micron’s channel has been money to trade off of, to say the least. Almost every test of the trend line has been purchased like clockwork, including one from two weeks ago. Even though there were some signs of distribution during June’s tantrum, there has been a robust recovery in the technology sector, so it isn’t a cause for concern.
However, there might be some alarmists who point out the slight Relative Strength Index (RSI) divergence that is building. This signal shows that the weekly uptrend has slowed significantly in momentum. But who cares? Seeing as there was a rapid rise in Micron’s stock, it was bound to relax at some point.
Below is a daily chart of Micron which reveals that the recent rally has carried the company’s stock back above its 20-day and 50-day moving averages.
And seeing as the stock has been on pause for five trading sessions, there is a clean breakout setup over $32. If there is a pop above the $32 mark, this could cause the stock to go back to its 52-week high near $33 and beyond.
Advantages of MU Stock
One of the main reasons that investors find Micron to be more attractive than its peers is because the company has already reported earnings. What does this mean? Well, it means that we can now trade without fear of a binary event throwing water on our plans.
Now that the late-June earnings release is moving into the distance, implied volatility has fallen to the lower quartile of its one-year range. Currently, MU’s implied volatility rank is 18%.
There are two things to keep in mind about MU stock: First, if you believe that semiconductor stocks are on route to glory, then buy the Aug $31 call for $1.90. Second, if you’re searching for a higher-probability play, you might want to think about selling the Aug $30 put for 63 cents. Say MU stock stays above $30 in August, you will capture 63 cents. If not, you are required to buy the stock with a basis of $29.37 if the put sits in-the-money at the time of expiration.
Featured Image: twitter
