6 Stocks To Watch For The Week of September 17, Red Flags For Micron

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6 Stocks To Watch For The Week of September 17, Red Flags For Micron

MICHAEL KRAMER AND THE CLIENTS OF MOTT CAPITAL OWN SHARES OF AAPL, TSLA, NFLX

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The week of September 17 doesn’t hold a lot of economic news. Earnings news appears to be pretty spares too, with only Micron reporting. Micron’s results may have a significant impact on the chips stocks, so it does carry a level of importance.

Micron (MU)

The options expiring on September 21, the day after Micron (MU) reports, are implying shares rise or fall by 9 percent from the $45 strike price. A pretty big move. The number of bets shares rise outnumber the bets shares fall by almost 2 to 1. There are 31,000 open call contracts to only 19,000 open puts contracts. The dollar value for the calls is about $5 million versus a dollar value for the puts of $4.3 million. More interesting is that the dollar amounts for the both and calls are almost the same

Going out to October 19, things get very different. The options are implying the stock rises or falls more than 13 percent. The number of bets the stock falls outweigh the wagers shares rise, with 40,000 open put contracts to only 25,000 open calls contracts. The dollar amounts favor shares falling, with the puts valued at $13 million, a considerable wager, almost double the value for the calls of $6.7 million.

What may be even more troubling news for the stock, is that analysts have already started taking down their earnings for the next four quarter by as much as 7.5 percent.

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Revenue estimates have started falling by up to 2 percent for the next four quarters as well.

I hate to say it, but even if Micron delivers better than expected fiscal fourth-quarter results, it may not be enough. The only thing investors will care about is the guidance for the quarters ahead. If guidance comes in better than reduced estimates, the stock has a good reason to bounce higher. If results come in below the reduced forecast, then the stock has much further to fall.

This is the first quarter I can remember over the past year that analysts have reduced their numbers for Micron into results. Price targets are coming down as well, with the average target falling from $80 to $76. I know you are thinking, well that is still 72 percent higher than the stock price, and the stock only trades at four times earnings. But those targets are likely too high and need to be reduced materially in coming weeks. Additionally, the low earnings multiple suggests earnings estimates at may even need to come down further.

On Thursday, I wrote that $45.25 was a battleground for Micron, and the stock was unable to rise above resistance, and I’m fearful we see more selling this week going into results. I suspect more analysts will cut their price targets and raise concerns ahead of results this week.

AMD (AMD)

AMD (AMD) is another stock likely heading lower. Yeah, when a stock has a relative strength index (RSI) at its highest level since 1979 on a weekly chart one needs to take notice and see the warnings signs.

Apple (AAPL)

Apple (AAPL) will be another to stock to watch. Support at $217 held steady. Resistance for Apple sits at $230. I think we can continue to see the stock work higher, and take out the $230 level. The RSI is still firmly trending higher and at this point has not indicated momentum is shifting.

Netflix (NFLX)

Netflix (NFLX) failed again at $375, not what I thought would happen. It likely sets up a retest of the uptrend that is now in place since shares bottomed in the low $300’s. We probably find out this week if Netflix is heading on to $400 or back to $300.

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Tesla (TSLA)

If Tesla’s (TSLA) stock can clear $301, shares likely to room to run to around $325.

JD (JD)

JD (JD) did an excellent job of bouncing off support at $26.11, managing to nearly fill the gap back to $29.50. But that may be it for the rebound. The downtrend in the stock, for now, seems too strong. The stock likely retests the $26.11 lows early this week. If it fails, the stock likely drops to $25.40.

Alibaba (BABA)

Alibaba (BABA) is no different, with its rebound looking reasonably complete as well. $151 seems to be on the table again.

China

For now, the Shanghai Composite can fight for one more day. Support is critical, but the downtrend may be too much.

Have a great week!

-Mike

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Michael Kramer is the Founder of Mott Capital and the creator of Reading the Markets.

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Charts used with the permission of Bloomberg Finance L.P. This report contains independent commentary to be used for informational and educational purposes only. Michael Kramer is a member and investment adviser representative with Mott Capital Management. Mr. Kramer is not affiliated with this company and does not serve on the board of any related company that issued this stock. All opinions and analyses presented by Michael Kramer in this analysis or market report are solely Michael Kramer’s views. Readers should not treat any opinion, viewpoint, or prediction expressed by Michael Kramer as a specific solicitation or recommendation to buy or sell a particular security or follow a particular strategy. Michael Kramer’s analyses are based upon information and independent research that he considers reliable, but neither Michael Kramer nor Mott Capital Management guarantees its completeness or accuracy, and it should not be relied upon as such. Michael Kramer is not under any obligation to update or correct any information presented in his analyses. Mr. Kramer’s statements, guidance, and opinions are subject to change without notice. Past performance is not indicative of future results. Neither Michael Kramer nor Mott Capital Management guarantees any specific outcome or profit. You should be aware of the real risk of loss in following any strategy or investment commentary presented in this analysis. Strategies or investments discussed may fluctuate in price or value. Investments or strategies mentioned in this analysis may not be suitable for you. This material does not consider your particular investment objectives, financial situation, or needs and is not intended as a recommendation appropriate for you. You must make an independent decision regarding investments or strategies in this analysis. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Before acting on information in this analysis, you should consider whether it is suitable for your circumstances and strongly consider seeking advice from your own financial or investment adviser to determine the suitability of any investment.