Tuesday, January 25, 2011

MU Watch

Memory-maker Micron Technology Inc. (MU) is a question of how late is late. It moved to bull phase on the price channel chart on Jan. 12, messed around sideways for five days thereafter, and then moved to higher level and, if stock prices can be said to have desires, seems to be wanting to continue its upward rise.

Entry is not at all late on the pfe/pps chart, which moved to bull phase on Jan. 21 but the stock has traded in a range in the two days following.

phase pfeppstrend

The company announced earnings on Dec. 22, so they are of no immediate concern. MU at this point is a pure technical play.

The financials have their bright spot, but it is far from being unalloyed joy.

MU's return on equity is 27%, and while its debt is a bit higher than I like for growth stocks, two-tenths of equity is not too horrible. Institutional ownership stands at 28%.

Sales have grown four out of the last five years, but the return on equity has grown only two out of the last five (it was down 2007-2009).

The stock moved to a swing high today before pulling back; whether it is significant or not remains to be seen. The last swing high was set on Jan. 18 with three days of trading around that level. The last significant swing low was on Dec. 28

Reversal Levels
  • $10.22, +2.8% (today's high)
  • $9.94 --- You are here.
  • $9.91, -0.3% (recent swing high)
  • $8.92, -10.3% (20-day moving average)
  • $8.23, -8.9% (50-day moving average)

The slow-trading chart shows a stock meandering mainly sideways since 2003 (!), switching phases every few years just to keep traders guessing. It is currently in neutral phase, although a confirming bull signal suggests a new bull phase is looming.

Monthly chart
phase pfeppstrend

The company has moved beyond its entry level of $8.78, so my stop less is set by the parabolic sar at $9.40.

This is a somewhat ambiguous play given the totality of evidence, although a good play looking solely at the daily charts.

I'm legging into this position, beginning with a bull spread expiring in February, short the $10 strike and long the $9 strike, for a $37 credit per contract.

Depending upon the price action, I may add to that with some long calls.

Table Abbreviations:
  • pfe - Location of the polarized fractal efficiency line.
  • pps - Person's Proprietary Signal mode.
  • trend - Trend of the polarized fractal efficiency line.

Key to the PPS/PFE tables
phase bull phase
bear phase
pfe +100 and above
+50 to below 100
0 to below +50
below 0 to above -50
-50 to above -100
below -100
pps bull confirmation
bear confirmation
trend uptrend
no trend

More on the PFE/PPS analysis

Read a detailed explanation of the analytical tools and how they’re used, including trading rules.

Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.

No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decision decisions for his or her own account, and take responsibility for the consequences.

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