Micron's Stock May Soar On Optimistic Outlook

Jan. 07, 2020 11:27 AM ETMicron Technology, Inc. (MU)17 Comments


  • Micron has received some positive analysts' commentary in recent days.
  • Traders appear to be growing more optimistic on the stock price.
  • The technical trends are suggesting a break-out is near.
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Since December 9, Micron's (NASDAQ:MU) stock has jumped by over 19%, and now it may be getting ready to rise by as much as another 13% by the middle of April. The optimism in Micron follows some bullish betting recently seen in Western Digital (WDC), which was previously noted. The trend in optimism could suggest that the investors are growing more positive on the group, and that alone could help to carry Micron higher.

To add to the recent optimism, Cowen came out and upgraded Micron on January 7 to an Outperform from Market Perform with a price target of $70 from $50. The analyst raised his outlook as the outlook for the DRAM market may improve faster than expected. Also, on January 7, Bernstein noted an attractive risk/reward for memory stocks due to supply cuts and a rebound in demand.

Betting The Shares Rise

The optimistic outlook is resulting in traders buying call options, betting the stock will rise. Recently, the Micron April 17, $60 calls saw their open interest levels rise by around 17,000 contracts. The contracts saw their most significant jump in trading on January 2, and data from Trade Alert shows about 15,500 call contracts were bought on that day, for roughly $2.65 per contract. It means that the stock would need to rise to around $62.65 by the expiration date for the trader to break-even. That is an increase of 13.2% from the current stock price of $55.34 on January 7.

Additionally, the March 20 $60 calls also saw a jump of around 11,000 contracts on the same day. The calls also traded on the ASK and were bought about $1.95. In this case, the stock would need to rise to around $61.95 for the trader to break-even.

Technical Trends Improve

The stock has been

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This article was written by

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Designed for investors looking to stay ahead of the pack.

I am Michael Kramer, the founder of Mott Capital Management and creator of Reading The Markets, an SA Marketplace service. I focus on long-only macro themes and trends, look for long-term thematic growth investments, and use options data to find unusual activity.

I use my over 25 years of experience as a buy-side trader, analyst, and portfolio manager, to explain the twists and turns of the stock market and where it may be heading next. Additionally, I use data from top vendors to formulate my analysis, including sell-side analyst estimates and research, newsfeeds, in-depth options data, and gamma levels. 

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