Semiconductor stocks have been battered and bruised this year on overblown demand fears amid a slowing economy, and Micron Technology (MU) has been unduly penalized with the sector.
The cyclical downtrend in chips will end – it always does — and a new bullish cycle will begin. But when that will happen is clouded by uncertainty about the broader economy.
The company is scheduled to report earnings next week. Although I believe in the strength of Micron’s fundamentals long term, the bottom line is that there is more downside risk than upside potential in the shares currently. This is especially true given the market’s reversal today and the Fed announcement scheduled for tomorrow.
Therefore, I am recommending we book a loss now. If you decide to stick with the current position, please do not hesitate to email me with any questions.
If the stock stabilizes and demand fears ease, we may look to trade MU again in the new year.
Current Stock Price: $55.48
Cost Basis: $67.24/$70.69
Action:
- Buy to close the MU Dec Monthly (12/16) 65 Call for around $0.01, but adjust as needed to close today
- Sell shares at market
Loss: $11.77, or $1,177 per contract/$15.22, or $1,522 per contract