I only started writing about Micron (MU) last week on Tuesday, and followed that posting up with two more. This is the fourth. In that short time my broader opinion hasn’t changed, that shares are going to be trading in a general downtrend. But naturally I expect there will be short term spikes higher and at times I expect those spikes to be significant. This is one of those times.
Followers of charting will recognize the term “Yo-Yo on an escalator”. I’d love to take credit for that analogy but I can’t, its been around a long time. Its pretty simple to understand, the escalator represents the broader trend while the Yo-Yo represents the day to day price fluctuations.
To my eyes the direction the escalator is moving is undeniable, its heading down and has been since the end of May when the PPS was trading over $63 per share. Since then each spike up (the Yo-Yo) has been lower than the one before, and each drop is bigger than the one that preceded it. That all too familiar bromide of lower highs and lower lows.
So in the broader sense I think the bears are winning and will be for a while, but in the nearer term as we head toward earnings on Thursday I am expecting bulls to have cause for excitement. Here’s the chart covering this period of late May to the present.
You can basically draw a diagonal line downward, left to right, connecting each of those price spikes when the Yo-Yo was moving up just before it headed back down. And likewise you can draw another line connecting each point when the stock hit a point and rebounded, just before the Yo-Yo snapped back up higher.
If you don’t want to draw the lines there’s a guy on YouTube who’s doing it and broadcasting his observations on the chart…
If you watch that video the speaker basically hedges his bets in a manner of speaking, giving the reasons why Micron could both trade higher or lower. And that is absolutely fair and reasonable, in fact I’d call it incredibly responsible.
Nobody has a crystal ball into the future and the reason I appreciate these videos is because the gentleman putting them out isn’t some brainless pumper or basher, talking about how some technical indication or news event makes a predicted move a slam dunk. There’s too much of that in social media already.
My opinion is bullish for this week, at least until Thursday’s earnings, and while I will explain why I will also caution that my opinion could turn out to be wrong.
I’ve done well with Micron so far. Tuesday of last week I bought Puts and wrote a blog post (my first on Micron) explaining why. Then on Wednesday after the PPS had been pushed from around $43 to less than $41 I sold those Puts for a better than 50% gain. I then turned around and bought Calls. Again I wrote another blog post explaining my rationale, and those Sept 28 $45 Call Options are still trading higher than what I paid for them, although not as high as they were trading Friday.
The reason I didn’t sell those Calls for a profit either Friday or today is because I am still of the opinion that MU will trade higher this week in spite of Monday’s pullback on lighter than normal volume.
The speaker in that YouTube video makes note of strength in the wake of bad news being a possible indication of bullishness going forward. I share that view. Micron has been hammered lately with forecasts of softening chip markets, by analyst downgrades, by fears of a trade war between China and the U.S.
Goldman Sachs, Macquerie, BMO, Deutsche Bank….
It almost reminds me of the rematch between Rocky Balboa and Clubber Lang in the third Rocky movie. Sly being Micron and Mr T as the analysts. Micron has lost some rounds for sure, but those analysts have to be getting pretty tired. Two big houses today and the volume was about 10 million lower than the average.
Disclaimer: The author has long MU Calls. The author is not receiving compensation for this article. This article is intended for informational and entertainment use only, and should not be construed as professional investment advice.