Micron Technology

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An earnings short-squeeze trade idea in the semiconductor complex is Micron Technology ( MU), which is set to release numbers on Wednesday after the market close. This is a global manufacturer and marketer of semiconductor devices, principally Dynamic Random Access Memory, NAND Flash and NOR Flash memory, as well as other memory technologies. Wall Street analysts, on average, expect Micron Technology to report revenue of $2 billion on a loss of 20 cents per share.

If you're looking for a heavily-shorted beaten-down stock heading into its earnings report this week, then make a sure to check out shares of Micron Technology. This stock has been smashed by the bears during the last three months, with shares dropping over 30%. That sharp drop could be setting up Micron Technology for a rebound trade post-earnings if the company can deliver the numbers the bulls are looking for.

The current short interest as a percentage of the float for Micron Technology is rather high at 7%. That means that out of the 961.20 million shares in the tradable float, 66.86 million are sold short by the bears.

From a technical perspective, MU is currently trading below both its 50-day and 200-day moving averages, which is bearish. This stock topped out in March at around $9.16 to $8.98 a share. Following that top, shares of MU have downtrended hard to a recent low of $5.30 a share. During that downtrend, shares of MU have consistently made lower highs and lower lows, which is bearish technical price action. That said, this sock has started to trend sideways for the last month at around $5.30 to $6.15 a share. A move outside of that sideways pattern post-earnings should setup MU for its next major trend.

If you're bullish on MU, then I would wait until after they report and look for long-biased trades if it can take out some near-term overhead resistance at $6.04 to $6.15 a share with high volume. Look for volume on that move that's near or above its three-month average action of 32.35 million shares. If we get that move, then I would look to add to MU once it sustains a move or close above both its 50-day moving average of $6.26 and its 200-day moving average of $6.67 a share. Target a pop towards $7 to $8 a share if the bulls spark a solid short-covering rally.

I would simply avoid MU or look for short-biased trades if it fails to trigger that breakout, and then moves below some near-term support at $5.65 to $5.30 a share with heavy volume. If we get that move, then I would look for MU to re-test and possibly take out some major support at $5.06 a share. The next major support area after $5.06 sits at around $4.50 a share.

To see more potential earnings short squeeze plays, check out the Earnings Short Squeeze Plays portfolio on Stockpickr.

-- Written by Roberto Pedone in Winderemere, Fla.


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At the time of publication, author had no positions in stocks mentioned.

Roberto Pedone, based out of Windermere, Fla., is an independent trader who focuses on stocks, options, futures, commodities and currencies. He is also an outside contributor to Beconequity.com and maintains the website Maddmoney.net, which he sold to Blue Wave Advisors in 2008. Roberto studied International Business at The Milwaukee School of Engineering, and he spent a year overseas studying business in Lubeck, Germany.

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