Happy Wonderful Wednesday!
Last week was a short holiday week. The market dropped 2 days out of 4. Friday, a short half-trading day brought the market down hard on news of a new virus strain. Monday as I type is recovering a small portion of the pullback.
To review past equity candidates, scroll down.
For today’s Trade of the Day, we will be looking at Micron Technology, Inc. symbol (MU). Before analyzing MU’s chart, let’s take a closer look at the stock and its services.
Micron Technology, Inc. designs, manufactures, and sells memory and storage products worldwide. The company offers memory products for the cloud server, enterprise, client, graphics, and networking markets, as well as for smartphone and other mobile-device markets. It markets its products through its direct sales force, independent sales representatives, distributors, and retailers; and web-based customer direct sales channel, as well as through channel and distribution partners.
Micron Technology, Inc. was founded in 1978 and is headquartered in Boise, Idaho.
I looked through a lot of charts over the weekend. I zeroed in on MU on Monday because it looks ready to climb further after being up 6 weeks in a row, despite the overall market pullback. It is a widely traded stock with lots of volume.
On the ADX indicator below the chart, notice how the green +DI line is on top of the -DI line (red) and the ADX. The green +DI line is above and the ADX line has turned up. These are all signals of building bullish strength with the thought that price may continue to rise.
For those who want more info on ADX, I give more details in the section below, or scroll down to the trade info.
Average Directional Index (ADX) Points to Direction and Strength
ADX is an easy indicator to interpret. The +DI line (green) is bullish and when it is on top, it suggests price is going to head up. When the -DI line (red) is on top, it suggests price is going to drop.
The black line is the strength line and when it heads up, it is telling you strength is moving into the DI line that is on top and in control. When the ADX line has been heading down, the DI line on top has been weakening and is ready for a change.
When the DI lines swap places and cross up and the ADX heads up, it suggests strength is moving into the new DI direction.
ADX signal = Profit Payout
Each candle on the chart represents price movement of a week. As the +DI heads up and moves further above the black line and both rise above the red line, it suggests there is bullish strength that could continue to grow, especially once the black line starts to turn up. If price continues to rise, the ADX line (black) will continue to turn to head up to imply that strength will continue to support the trade. As long as the ADX is heading up, it means it is supporting the bullish- up direction. The opposite is true if the -DI line heads up to cross the +DI line – this suggests bearish strength and a climb in price. If the ADX line heads up while the red line -DI is on top, is it saying strength is building into the downward direction.
I am looking at its chart and possible trade on Monday, but the pattern looks as if it will continue and the +DI may continue heading up if price keeps rising. You don’t want to consider entry if the current candle doesn’t stay above 86 or if the +DI line were to turn down and drop below the ADX.
If you are interested in learning more about the ADX strength line, I’d like to suggest you consider getting Inevitable Trend Moves. This book covers in detail how to trade the ADX to jump in during a confirmed strength stage that is as clear as looking at a picture with arrows pointing out direction.
MU Potential Trade
Please note and remember that I am typing this on Monday, two days before you receive it and the information, I am sharing could change over those two days and is intended to share the opportunities that options offer us.
Micron (MU) was up the last 6 weeks, suggesting it may continue its upward bias. It appears to be ready to head higher and the ADX turn up further, if this continues, the pattern should remain intact as price keeps rising. Notice the +DI is above the -DI line on the chart above. We want the +DI to stay above the -DI (green line above red) to consider a trade.
Price is likely to rise further and move above 86 entry. Its first target is 92 as the +DI (green line) stays above and the ADX (black line) turns up. Its current uptrend should remain intact, and price should continue to rise, perhaps even higher. We will keep an eye on MU over the next couple weeks.
I am looking at charts on Monday, so prices are apt to change a little by Wednesday. Be sure the green +DI line continues to rise and goes further above the red -DI line and price stays above 86 before entry.
To buy shares MU today, price would be approximately 86. It would be silly to buy shares if you expect price to drop. You’d wait until it hit a bottom and started to rise again. If price stays above 86, perhaps you could buy 10 shares for $860. If price rose to $92, that would be a profit of $6 or $60 for the 10 shares or a 7% gain.
This said, option trading offers the potential of a smaller initial investment and higher percentage gain even when price is expected to rise. Let’s take a look.
If you bought one Call option contract covering 100 shares of MU’s stock with a December 17th expiration date (Dec 21) for the $92 strike and premium would be approximately $1.06 today or a total of $106 per contract. If price increased the expected $7 to $92 target over the next few weeks, the premium might increase approximately $5 to $ 6.06 per share or $500 on your 100-share contract. This is a gain of $500 on your $106 investment or a 472% gain over a couple week
Remember you can close an option trade anywhere along the line before expiration to take gains or stop a loss.
Options can offer a win, win, win trade opportunity. They often offer a smaller overall investment, covering more shares of stock and potentially offer greater profits.
If you are having any kind of trouble taking advantage of these trades, I don’t want you to miss out. I have put together programs that help traders just like you access the potential profits that options provide. I write like we are having a conversation, so the information is easy to understand and apply. Be sure to check out the programs shared in this email and we will make it easy for you to get your share.
I love to trade, and I love to teach. It is my thing.
Yours for a prosperous future,
PS-I have created this daily letter to help you see the great potential you can realize by trading options. Being able to recognize these set ups are a key first step in generating wealth with options. Once you are in a trade, there is a huge range of tools that can be used to manage the many possibilities that can present themselves. If you are interested in learning how to apply these tools and increase the potential of each trade, click here to learn more.
Review of Past Candidates:
Two weeks ago, we discussed REGN with a Dec 3rd (Dec wk 1) expiration, a 640 strike and a premium of 17.50. (There was a typo and the newsletter read $47.50, but you would have paid around $17.50). It rose as high as 23.73 on Friday and today, on Monday as I type it has pulled back to 17.50 and is rising.
Last week, we discussed FB and an expiration of December 10th (Dec wk 2) and a 260 strike with a premium of 7.50. There was no trade as it never made it and stayed above 353.