We are contemplating an income trade on Micron (MU) and a long on Baozun (BZUN). The trade on Micron will last one week. We would only take this trade if you entered during the week when we first mentioned semiconductors, MU MRVL and NVDA as potential candidates. The latter did not break out until Thursday. BZUN has been basing since earnings, looking more like a potential reversal from the 61.8% Fibonacci.
Micron Income Trade
Entering Monday gives you the likely benefit of additional premium for each 100 shares in your possession and the appreciation in price since entering. Micron weekly options, 2017 8-SEP 31.5 (8) are going for 1.13 as of Thursday MOC.
Micron breaking out of a broadening pattern, nearing overhead resistance
Alternatively, you could enter a Bull Put Credit Spread using the weeklies.
- Sell 2017 15-SEPT 31.00 Put (0.48) or better
- Buy 2017 15-SEPT 30.00 Put (0.26) or better
- Receive a (0.20) credit. Would prefer 0.30 or more
In taking this trade you are banking on MU continuing higher or staying above 31.00 by expiration on September 15. YOu have a long weekend for theta to work.
The key to income trading is IV Rank. You want to be a seller of options when IV Rank is above 50. You want to be a buyer of options when IV Rank is especially low (<0.20). Micron IV Rank is 0.84. Check!
Baozun BZUN Trade
Baozun reported earnings on August 21, 2017, EPS of $0.11 beating by $0.01 on revenue of $131.03M (+ 24.9% Y/Y) beats by $0.35M.
My view is the stock was “priced to perfection” going into earnings. Now that earnings have been digested and the stock is oversold in the short term, we have been looking for signs of traders returning to this momentum name. A move back above the 9/20ema daily would signal momentum traders are back.
This morning BZUN is higher (+0.36) in pre-market trading. We’ll wait for the (ToD) setup to mature into the Opening Range to gauge our prospects of “adding” to our position. With AABA, BABA, BIDU and other Chinese stocks in play this morning and the continuing thrust of the current “up cycle” BZUN should follow through soon. A loss of the current lows at 26.00 (+/-) would negate this trade.
FANG stocks, QQQ, and XLK should be monitored for relative strength, as all of this will play in our favor should we see buying today. We have positions in WB AAPL AMD EXTR CLF THC that we will monitor today as well.
It is Fry-Day so be prepared for a quick change in tempo after 10:30 ~ 11:00 AM.
Happy Labor Day,
Vinny
We’ll be LIVE at 9:15 AM.