Editors Note:

I added Micron after their outstanding earnings. If their post earnings dip continues we could add it to the portfolio. Home Depot is moving sideways but still a target.

New Watch List Entry:

MU - Micron Technology - Company Description

Micron Technology, Inc. provides semiconductor systems worldwide. The company operates through four segments: Compute and Networking Business Unit, Storage Business Unit, Mobile Business Unit, and Embedded Business Unit. It offers DDR3 and DDR4 DRAM products for computers, servers, networking devices, communications equipment, consumer electronics, automotive, and industrial applications; mobile low-power DRAM products for smartphones, tablets, automotive, laptop computers, and other mobile consumer device applications; DDR2 and DDR DRAM, GDDR5 and GDDR5X DRAM, SDRAM, and RLDRAM products for networking devices, servers, consumer electronics, communications equipment, computer peripherals, automotive and industrial applications, and computer memory upgrades; and hybrid memory cube semiconductor memory devices for use in networking and computing applications. The company also provides NAND Flash products, which are electrically re-writeable, non-volatile semiconductor memory devices; client solid-state drives (SSDs) for notebooks, desktops, workstations, and other consumer applications; enterprise SSDs for server and storage applications; managed multi-chip package products; digital media products, including flash memory cards and JumpDrive products under the Lexar brand name. In addition, it manufactures products that are sold under other brand names; and resells flash memory products that are purchased from other NAND Flash suppliers. Further, the company provides 3D XPoint memory products; and NOR Flash, which are electrically re-writeable and semiconductor memory devices for automotive, industrial, connected home, and consumer applications. It markets its products to original equipment manufacturers and retailers through its internal sales force, independent sales representatives, and distributors; and through a Web-based customer direct sales channel, and channel and distribution partners.

Micron Technology (MU) reported earnings of $1.62 compared to estimates for $1.51. Revenue rose 92% to $5.57 billion. CEO Sanjay Mehrotra said, "Our results reflect solid execution of our cost-reduction plans and ongoing favorable industry supply-and-demand dynamics." They guided for the current quarter for earnings $1.80 on revenue of $5.9 billion at the midpoint. Analysts were expecting $1.57 and $5.62 billion. The company ended the quarter with $4.9 billion in cash.

Micron said DRAM prices rose 14% during the quarter. That is after similar gains in the prior two quarters as well. Memory is in tight supply and prices are rising sharply. Hewlett Packard warned that margins would shrink because of rising memory prices.

After a post earnings spike in afterhours on Thursday the stock fell 5% on Friday. With revenue up 92% and a beat on earnings and guidance you would have expected a blowout gain. However, Micron shares were up 200% since May 2016 so there was a lot of expectation already built in. This is definitely a buy the dip story.

With a dip to $28.75:

Buy Jan 2018, $32 call, currently $3.25, initial stop loss $26.15.

Stocks Dropped from Watch List:

      No Watch List Drops

Active Watch List Play Descriptions:

HD - Home Depot - Company Description

The Home Depot, Inc. operates as a home improvement retailer. It operates The Home Depot stores that sell various building materials, home improvement products, and lawn and garden products, as well as provide installation, home maintenance, and professional service programs to do-it-yourself, do-it-for-me (DIFM), and professional customers. The company offers installation programs that include flooring, cabinets, countertops, water heaters, and sheds; and professional installation in various categories sold through its in-home sales programs, such as roofing, siding, windows, cabinet refacing, furnaces, and central air systems, as well as acts as a contractor to provide installation services to its DIFM customers through third-party installers. It primarily serves home owners; and professional renovators/remodelers, general contractors, handymen, property managers, building service contractors, and specialty tradesmen, such as installers. The company also sells its products through online. It operates through approximately 2,278 stores, including 1,977 in the United States, including the Commonwealth of Puerto Rico, and the territories of the U.S. Virgin Islands and Guam; 182 in Canada; and 119 in Mexico.

Shares were crushed last week on profit taking and the Amazon acquisition of Whole Foods. Analysts are seeing Amazon under every bed and around every corner. Fortunately, HD is almost Amazon proof. They are getting killed on a knee jerk reaction to Amazon's new endeavors.

The CEO was on CNBC last week and he said strong home sales and rising home prices were a boon for Home Depot. People are either improving their homes so they can sell them or remodeling because it is too expensive to move. Either way it benefits HD. Shares imploded on Friday with a $4 drop and there was no news. They hit a new high with the Dow on Monday at $159 and closed Friday at $151.

Eventually this mindless dumping will come to an end. Ideally we would like to be in HD with an entry point around $146. However, other traders will see this potential support and probably try to enter early so we will do the same thing.

With a HD trade at $147.25

Buy Jan $150 call, estimated price $6.35
Sell short Jan $165 call, estimates price $2.00.
Estimated net debit $4.35.