Cycle Trading

[JLS]

I expect Micron to beat.

First, my personal preference is to not use theoretical options statistics to predict gain or loss. That's because all of those calculations are based on Gaussian distribution. That distribution function very rarely describes stock behavior, but it's a simple formula so ...

Instead, I use actual SR calculations, and also current and historical trading patterns to make predictions.

The options I chose for MU have an expiration of 7 trading days beyond earnings announcement. Can there be a 2-point upward move during that period? Definitely if earnings estimates are exceeded which I think they will be.

The first chart below shows MU trading within the bounds of a fork pattern, and that shows that relatively quick excursions of a couple points is the norm. In fact, MU is near the middle of the fork, so it could easily move to the upper tine. In fact, MU moved 2.6 points after its last earnings report and that was from a lower base (meaning a higher percentage move than it would have to make this time).

The second chart below shows the actual statistical distribution of SR levels. If MU beats, it easily goes above the lower SR then tests the middle one which is not quite 2-points away. A good test of that line means it probably goes above that line and aims at the upper line.