History says you should buy the Micron stock pullback to a key trendline
Micron Technology Inc (NASDAQ:MU) stock has taken a 24% haircut off its June 25 record high of $1,255. The shares have dipped nearly 20% during this quarter alone. The upside is that this pullback has the stock testing a historically bullish trendline, meaning another jump higher could be in the cards.
According to Schaeffer's Senior Quantitative Analyst Rocky White, MU shares are within 0.75 of their 80-day moving average's 20-day average true range (ATR), after remaining below it 80% of the time in the past two weeks and in 80% of the last 42 trading sessions.
This signal has occurred 16 times in the last 10 years, after which MU was higher one month later 75% of the time, averaging a 8.8% gain. From their current perch at $947.79, a surge of this magnitude would put the shares back above the $1,000.
Put volume has been on the rise, per MU's 50-day put/call volume ratio at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), which stands higher than 90% of all other readings from the past year. Should this bearish sentiment begin to unwind, it could trigger tailwinds for the shares.
Options are attractively priced at the moment, per Micron Technology stock's Schaeffer's Volatility Index (SVI) of 52%, which stands higher than just 15% of all other readings from the past year, implying that near-term option traders are pricing in relatively low volatility expectations.
It's also worth noting that MU has tended to outperform options traders' volatility expectations over the last year. This is per its Schaeffer's Volatility Scorecard (SVS) of 86 out of 100.