This morning, MU stock is rallying as indices are slipping. It appears Micron investors are fickle, which usually is an opportunity for easy trade setups. Today I am not chasing upside hopium in MU stock. Instead, I am betting that the naysayers of this company are wrong with their estimates.
This is a rinse and repeat trade setup, so I come into it with profits in hand. Fundamentally, there is no doubt that this company is cheap from a P/E perspective and based on trailing 12 months results. The bears see major risks for their pricing power so they think that even though it’s cheap, it will get cheaper. I disagree and therein lies my opportunity.
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Technically, Micron stock has been tested enough times that we have clear support zones. The five-year range on the stock is massive ranging from $9 in 2016 to $63 in March. Often extremes are wrong on either side. Somewhere in the middle lies the truth.
The latest major pivot point in Micron stock is around $46 per share. This has been a major zone of contention Zone since November of last year. Below it I believe there is support against which I can sell downside risk to create income with no money out-of-pocket.
If I’m wrong and price falls below my levels, then I will own shares of Micron at a deep discount from current prices. In the long-term, I believe I can manage out of those for a profit in a rising economy.
We now live in a technology-based world that is getting even more so at a neck-breaking pace. Most companies that supply components to feed this tech will do well for years to come.
Selling naked puts is daunting. Those who want to mitigate that risk can sell spreads instead.
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