5G AND ELECTRIC CARS – DEMAND FOR SEMICONDUCTOR MEMORY WEAKENING

New 5G phones are hot.

New models of electric cars are coming.

Both 5G and electric cars have been driving up the demand for semiconductor memory. However, the recent indications are that in the short term, the demand is weakening.  With weakening demand in the short term, prices of DRAM and NAND are flattening.  This could have an adverse impact on the earnings of Micron (MU).

Risk Event

MU reports earnings on September 28th after the close. There is a 65% probability of a downside surprise.   The CEO  of the company is always bullish and does a good job getting on the media and twisting the bad news into good news.  You already know that this stock market is controlled by the momo crowd.  The momo crowd does not do much analysis and typically analysis by momo’s gurus is superficial.

The momo crowd often buys whatever is being promoted in the media.  For this reason, it is conceivable that the momo crowd will buy the stock even if earnings are not good.  However, if the earnings are not good, smart money will sell.  It is simply not possible to predict with great confidence the outcome of the battle in this scenario.

Buy Zones And Buy Now Rating

For those following the Good Way, the Buy Now rating is ‘NO.’

For those following the Best Way, the buy zone remains suspended.

The very long-term target zone remains $126 to $135.

What To Do Now

Here are the key points.

• MU is long from $21.77.  It is trading at $74.36 as of this writing.   As the stock has moved up, the buy zone has been raised and newer subscribers are holding MU from higher prices compared to $21.77 for long-time subscribers.
• What to do now depends on your personal preference, the rest of your portfolio, and at what price you bought MU.
• For those with a well-diversified portfolio, a low average price with substantial unrealized gains, and who have been booking some profits on an ongoing basis, there is merit to holding a core position  At present, the maximum recommended size of the core position is 25% of full core position size.
• To learn about the core position and full core position size, please see Trade Management Guidelines.
• For those who do not meet the criteria stated above, consider reducing the core position size or even exiting the position based on personal preference.
• If there is a substantial dip in the stock, a signal to start a Trade Around position for the short term may be given.  See Trade Management Guidelines to learn about Trade Around positions.
• If there is a substantial dip in the stock, a new buy zone for the core long term position may be given.