Micron (MU) stays strong against its chip peers. Over the past year MU rose 536%, far ahead of the SMH semiconductor ETF and the XLK technology ETF. The memory chip group leads the whole sector by a wide margin, and MU is the standout name inside it.
Chart setup
The price has formed a wedge shape. Both boundary lines point up but move toward each other as earnings near. MU has not broken past a gap near 1125, and it sits below the all-time highs near 1255. Price traded in a range of about 900 to 1036, then pushed above that range. The old ceiling near 1036 now acts as a floor. From here it either breaks down back into the range, or fills the gap and starts a new uptrend.
Moving averages: the 5-day exponential moving average sits near 1063, the closest line to current price. The 21-day average, standing for one month, sits near 1013.
RSI, the momentum measure, shows a triangular shape. Momentum is fading even while the longer uptrend holds. Slowing momentum before earnings is normal. RSI stays above the 50 midline, so the tilt is still bullish.
The volume profile shows the heaviest trading happened between 875 and 995. Above 1100 the stock trades thin, with little volume support.
The trade
The expected move by the end of this week, shown as an orange box, is plus or minus about 7.4%. For November, the green box, the expected move is plus or minus about 19.2%, which lines up close to the old highs.
The example is a bullish, defined-risk trade: a November 20th call butterfly buying the 1130 and 1270 strikes and selling two 1200 strikes, for a 615 debit. It gives a mountain-shaped risk profile with 51 days to expiration.
Max loss is the 615 debit paid, the most that can be lost if the trade is held to expiration. Max profit is 63.85, reached only if MU expires exactly at the 1200 strike, an unlikely outcome. Break-evens are 1136.15 and 1263.85, which sit 6.3% and 18.2% above current price. The expected move of about 19% could overshoot the top break-even.
If the trade moves in your favor, you can close it early rather than hold to expiration. That protects gains if price climbs back above about 1236, where a winning position could turn into a loss.
