Micron Technology (MU) has just taken traders on one of the wildest round trips of the year. The stock rocketed nearly 70% in five weeks, peaking above $1,250 in late June, only to surrender 35% of that value in the 22 days since. Moves this violent have nothing to do with fundamentals, they are pure sentiment. And as I detail in my book, Mean Reversion Trading, extreme sentiment swings are exactly where the highest-probability contrarian setups are born. With MU, the actual trade has not fully lined up yet, but there are two core indicators worth watching closely: Accelerated MACD (5, 13, 5): I prefer this faster MACD setting to catch momentum pivots before the rest of the market wakes up. Right now, the blue MACD line has been consistently tracking below the yellow signal line. I am waiting for the blue line to cleanly cross above the signal, triggering a bullish MACD crossover. This has not happened yet, so patience is the name of the game here. With heavyweights like Alphabet , Tesla , and Intel reporting earnings this week, the entire tech sector is about to make a massive move. If that move happens to be to the upside, MU will naturally catch a powerful tailwind. Bollinger Bands: Bollinger Bands capture volatility-adjusted price channels beautifully. Statistically, roughly 95% of a stock’s price action is expected to occur within these bands. Because they contain the vast majority of the price action, these bands can also serve as dynamic support and resistance levels, which is exactly what I am looking for here. MU is just beginning to bounce off the bottom of the lower band. If tech earnings do not disappoint this week, we could see a sizable reversion move play out in the coming days. The Trade Setup: MU 870-875 Bull Call Spread Once we get the proper confirmation signals, I will target an At-The-Money (ATM) bull call spread. The strategy is to buy the call option one strike below the current price and simultaneously sell the call option one strike above it, effectively sandwiching the live price between my strikes. Because MU is currently trading right around $870, the 870/875 bull call spread serves as the baseline template. However, market conditions are fluid. If a strong round of tech earnings pushes MU up to $881 by the time our signal fires, I will simply adjust my strikes to reflect that new price, constructing an 880/885 bull call spread instead. If tracking these setups manually isn’t your style, Maya (our trading algorithm) handles entries and exits completely autonomously using a 100% rules-based system. We are running a soft launch right now, so you can lock in our $47 launch offer here: https://tradewithmaya.com/autotrading . Here is my exact trade setup (based on current price of $870): Buy $870 call, Aug 21 expiry Sell $875 call, Aug 21 expiry Contracts: 1 Cost: $250 Potential Profit: $250 — Nishant Pant Founder: https://tradewithmaya.com/ Author: ” Mean Reversion Trading ″ Youtube, Twitter: @TheMeanTrader DISCLOSURES: N/A All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, or its parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL’S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.
How to use options to play ‘a sizable reversion move’ in Micron over the next few days
