uploads/2019/12/AdobeStock_310560490_Editorial_Use_Only.jpeg

Micron’s Stock Rally Might Just Be Getting Started

By

Updated

Micron stock (MU) closed trading at $ 55.42 on December 24, rising 0.04% from the previous trading session. And that’s not all. The company’s share price continues to reach new highs on optimism surrounding a potential memory cycle recovery.

Meanwhile, the S&P 500 (SPY) decreased to 3,223.38, representing a daily loss of 0.02%. Micron stock also lagged behind the Dow Jones Industrial Average‘s daily decrease of 0.21%. Meanwhile, the tech-heavy Nasdaq index surged 0.08%. 

Micron stock has also returned 20.8% over the past month, which shows that it has outperformed the US semiconductor industry. The industry has returned just 8.5%. 

Moreover, Rosenblatt analyst Hans Mosesmann recently boosted MU’s price target, following Micron’s fiscal Q1 earnings results. How come? Mosesmann believes the company’s numbers reflect early signs of a memory price recovery. 

Also, we’ve seen several bullish trades on Micron stock over the past few trading sessions. And these bets come up with a rise in the stock price over the coming weeks.

Micron stock’s price target boost from Rosenblatt and Citi

On December 19, Hans Mosesmann raised Micron’s price target to $100 from $80, reiterating a “buy” rating on the stock. And, according to The Fly, “The analyst recommended Micron as a ‘strong buy,’ saying the company is executing successfully, improving the product stack and delivering 50% free cash flow return to investors.”

On the other hand, Christopher Danely—an analyst at Citi—boosted Micron’s price target to $38 from $35 but maintained a “sell” rating on the stock. According to The Fly, “The analyst agrees with the company that DRAM fundamentals are close to a bottom, but notes that Micron shares are ‘almost back to the peak.’ Having said that, Christopher Danely remains on the sidelines and waits for a ‘less frothy’ entry point.”

Micron stock technical outlook

Considering that the MU stock has set a new 52-week high in the past trading session, its relative strength index (RSI) has also surged to 74.85, indicating an “overbought” condition. However, for a semiconductor stock like Micron, RSI could be a concern for a while. For instance, AMD stock has gained more than 20% while its RSI has indicated overbought conditions

Moreover, Micron stock is also trading 1.52% below its upper Bollinger line. And this trend means the stock is relatively overbought. 

The company’s money flow index or MFI is currently floating near the overbought level as well. It’s coming in at 76.55. 

Options bulls and MU stock

Traders from the options market made several bullish bets, suggesting that Micron stock could rise in the coming weeks. During Tuesday’s trading session, there was a purchase of 5,087 $57.00 January 10 call options for $0.82 per contract. And this purchase brings the total number of open contracts to about 5,226.

To earn a profit as an options holder, the stock would need to rise to about $58.00. In that case, you’d be looking at a gain of 5.5% from the current price.

Also, the open interest levels for the January 17 $56.00 calls increased moderately during Tuesday’s session as well. According to Barchart.com, the open contracts increased by 2,418 contracts to about 5,177. The contracts traded at $0.21 on December 24.

With all that said, the open interest represents a total value of about $ 108,000. For the buyer of the $56.00 calls to earn a profit, MU would need to rise to around $56.20. And that would be a gain of about 1.4% from the current levels.

Want to learn more about technical analysis? Take a look at some of my other Market Realist articles below.

More From Market Realist