Micron Stock Rallies Into Key Resistance After Upgrade

Micron sold off sharply in the fourth quarter

Jan 9, 2019 at 9:57 AM
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The shares of Micron Technology, Inc. (NASDAQ:MU) are trading up 6.4% at $35.89, after an upgrade to "outperform" from "market perform" at Bernstein. The brokerage firm said the memory chip stock's recent sell-off has created an attractive risk/reward backdrop, and cited expectations for an earlier-than-expected recovery in DRAM prices.

The analyst in coverage also lowered their price target to $52 from $60, though this is still a 54% premium to last night's close at $33.74. This follows a particularly bruising fourth quarter for Micron, which shed 30% over the three-month period -- its worst quarterly performance since 2015. This culminated in a 16-month low of $28.39 for MU stock, tagged on Dec. 26. The shares have recovered some since then, but are running into familiar resistance at their 40-day moving average.

Against this backdrop, options traders have been ramping up their bearish exposure to the stock. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), MU's 10-day put/call volume ratio of 1.02 ranks in the 95th annual percentile, meaning puts have been bought to open over calls at a quicker-than-usual clip.

Drilling down, the March 32 put has seen one of the biggest increases in open interest in the last 10 days, with nearly 13,000 contracts added. Data from the major options exchanges confirms notable buy-to-open activity here, meaning options traders expect MU stock to sink back below $32 by March options expiration.

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