How to Trade Micron Stock Right Now

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In celebration of yesterday’s record close in the Nasdaq, we’re taking a fresh look at Micron (NASDAQ:MU). Last week’s market whack took a bite out of Micron stock’s recent gains, shattering short-term support in the process. Is the trend dead, or is Micron playing possum? Read on to find out.

Source: madamF / Shutterstock.com

Semiconductors have been one of the major growth engines behind the tech sector’s dominance. The industry hosts some of the biggest gainers in technology stocks from Advanced Micro Devices (NASDAQ:AMD) and Nvidia (NASDAQ:NVDA) to Lam Research (NASDAQ:LRCX).

From a performance perspective, Micron finds itself in the middle of the pack. It’s higher than a year ago, but not dramatically so. At least not compared to the insanity that has been AMD.

With yesterday’s rebound, MU stock now finds itself up 5.8% year-to-date.

MU Stock Charts

Source: The thinkorswim® platform from TD Ameritrade

Ever since the stock completed a double bottom pattern last year, buyers have been in complete control of the weekly trend. The 200-, 50-, and 20-week moving averages are all cruising higher in support of the bulls’ reign. Like loyal soldiers, they stand ready to defend their king from the occasional attack.

Indeed, the 20-week moving average has successfully defended multiple selling sorties over the past year. Its current perch at $50 coincides nicely with an old resistance level. Both are obvious potential support zones if Micron should somehow stumble another 10%. The eventual target for the weekly trend is 2018’s peak near $65.

What appears to be a flesh wound on the weekly becomes a touch more severe on the daily time frame. Last week’s pullback took Micron stock below its rising 20-day moving average, cracking $56 support. The short-term trend is officially on the ropes and needs time and more positive price action to heal.

We’ve now seen four distribution days over the past eight trading sessions. And the 5.8% bump, as impressive as it is, fails to turn the trend back up. I’m watching the prior pivot and 20-day moving average near $57. A push above that is needed before I don my rally cap.

Source: The thinkorswim® platform from TD Ameritrade

On the south side, the 50-day moving average (at $53) is the obvious spot to watch. We rebounded there yesterday and need to remain above it for the intermediate uptrend to remain intact. A break above $57 or $53. Until then, Micron is playing the fiddle in the middle, and I see few reasons to bet directionally on it. Because of the underlying strength of the technology sector, however, I’m inclined to wager the eventual resolution is higher.

That said, if you’re willing to shop other semiconductors, AMD and LRCX both have better-looking charts right now, so consider those the better setups.

Micron Implied Volatility

The implied volatility for Micron options isn’t providing a clear signal either. With a rank of 31%, it’s neither high nor low which essentially means you can take your pick when it comes to strategy selection. Premiums aren’t cheap or expensive.

If you want a high probability of profit then bull puts work. Alternatively, if you seek higher rewards and are willing to make a more bullish bet, then bull calls beckon.

As of this writing, Tyler Craig held bullish trades in AMD. For a free trial to the best trading community on the planet and Tyler’s current home, click here!