Micron Stock Options Price In a Big Post-Earnings Move

MU reports earnings after the close tomorrow

by Patrick Martin

Published on Mar 21, 2018 at 12:41 PM

Micron Technology, Inc. (NASDAQ:MU) received another bullish brokerage note today, after BMO raised its price target to $63 from $43. The brokerage firm noted, "Memory industry fundamentals, especially for DRAM, remain strong." Despite the price-target hike, Micron is trading down 0.4% at $60.93 -- but could see volatile trading on Friday, with the chipmaker slated to report second-quarter earnings after the close tomorrow. 

MU stock has had a positive earnings reaction in four of the last five quarters, while over the last eight quarters, the equity has averaged a 5.9% move the day after earnings, regardless of direction. This time around, the options market is pricing in a much larger-than-usual 10.6% one-day move, per Trade-Alert.

Looking closer at the charts, today's dip for Micron stock runs counter to its longer-term trend. The shares hit a 17-year high of $63.42 on March 13, and have added nearly 50% in 2018, guided higher by their ascending 10-day moving average since early February. As such, the equity's 14-day Relative Strength Index (RSI) closed last night at 78 -- in overbought territory -- suggesting a near-term pullback may have been in the cards.

The shares could struggle next week, too, considering Micron is one of the worst stocks to own during Easter week, according to Schaeffer's Senior Quantitative Analyst Rocky White. The stock has averaged a loss of 0.51% in the four-day period during the past 10 years, and has been positive only 30% of the time.

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