Micron Technology, Inc. (NASDAQ: MU): Not every play involves the upside, particularly when the market is telling you that some sectors are under selling pressure.
The chips, an important market leader, stumbled in April. This set up some great downside opportunities in May. Indeed, we saw MU break its support in late April. When it came back up to test that support and started to roll back lower, we moved in for a downside play. On April 29, we bought June $85 put options for $4.40 when the stock was trading at $85.91.
MU fell into May 4, but then rebounded somewhat to test that last break lower. Then, MU moved up to the 10-day exponential moving average (EMA) last Friday and showed a hangman doji there. From there, it collapsed just as the pattern indicated.
MU broke lower on Monday and gapped sharply lower on Tuesday, May 11. On that gap, we saw a lot of Nasdaq stocks move lower, but they started to hold from the opening gap. The move took our play to the initial target. With the other Nasdaq stocks starting to hold, we sold the options for $9.29 and banked a 111% gain.
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