See where Micron (MU) - Get Report is trading. Ugly right? More like ugleeeee. Yet, unbroken. Unbroken? What are you smoking, Sarge? Take a look my friends...it may be time to tip toe back in. Just a small piece at a time, friends. The evil rotation, the cyclical nature of NAND demand, and trade conflicts are still out there hunting you down like the dog you are.
Now, the name runs with a forward looking PE of 5, dudes. That means one of two things. Either the name is oversold, or the name is about to meet it's own version of Armageddon. Micron sports a very comfortable Quick Ratio, and wildly growing profit margins. Three year growth rates are strong for both earnings and sales. On top of that, the firm is not burdened by having to pay a dividend. (Dividend seekers wishing to play the space should find interest in either Intel for all around good performance and actual industry leadership, or Seagate (STX) - Get Report for a higher payout, and a few more thrills than you bargain for.)
Currently, I am down to 10% of my intended long in this name. Today, I expect to take that number up to somewhere between 15% and 18%. Why, you ask? Easy, for the second time this month, the share price seeks the protection of both a 61.8% retracement of the low to high move of 2018, and at the same time, the lower trend line of our old friend the Andrews' Pitchfork.
Incredibly, after more than a 22% top to bottom free-fall, this name appears to be technically unbroken. Why buy just a smidge? That's all about having some dry powder, gang. The headline news situation is clearly fluid. Bad things could still happen to this stock, but the risk/reward possibility has turned in my opinion...in a more favorable direction.
Trade Idea (Using Minimal Lots)
-Purchase 100 shares of MU at or close to the last sale of 49.02.
-Sell (write) one $42 June 15 put option at or close to the last sale of $0.99. (42 is the closest available strike price to the 200 day SMA of 41.76.)
- Sell (write) one $37 June 15 put option at or close to the last sale of $0.35. (This strike price is below the 2018 low.)
Net Basis: $47.68 (Below the current 200 day SMA.)
Best Case: The stock rises in value, or decreases to a point where the chart again favors a small purchase.
Worst Case: The shares collapse. Rome burns. Civilization falls into ruin. The risk in this case is that you end up long 300 shares of MU by mid-June at an average price of 42.23, after accounting for the premiums that the trader raised on the initial trades.