Micron stock just dived down upon its quarterly earnings last night. What's the next play?

Micron Technology (MU) posted its quarterly earnings on December 18th, an event that garnered substantial options activity—by some measures, the highest volume of any company reporting that evening. The underlying expectations were significant, with the options market pricing in roughly a 12.5% post-earnings move. However, actual price action proved even more dramatic, with MU initially sliding about 16.2% after the results and extending that drop towards 19% at one point.

While the company’s market capitalization hovered around $115.7 billion pre-earnings, the subsequent sell-off eroded that figure notably. The move appeared to be driven by disappointment and a more challenging forward outlook, rather than a one-time miss. Despite that, this morning, the AI at ForexLive.com delivered a mildly bullish predictive score of +2—a signal that some bounce or temporary relief might be in the cards. Indeed, MU found a short-term support level around $87 and managed to stage a rebound toward $92, offering contrarian traders a quick 5–6% upside pop. But in the bigger picture, the disappointing earnings report suggests that the bearish thesis may hold more weight over the coming days or weeks.

Identifying a short opportunity on MU stock
Given the fundamental disappointment baked into MU’s earnings and forward guidance, it’s logical to anticipate further downside or at least a reversion to a lower mean. After any initial relief rally or bounce from a key support level, a strategic short position could capture a renewed leg lower as the market digests the weaker growth narrative.

We’re not ignoring the early morning bullish hints from order flow or AI models. Instead, we’re acknowledging that such signals might produce short-term rebounds—potentially pushing MU into more attractive price zones for a short entry. In other words, the “what” is a structured short-selling opportunity that capitalizes on temporary strength within a longer-term weak post-earnings backdrop.

The Why: Rationale behind going short on Micron Technology (and it's not about the headlines of the report, revenue, or EPS)

1. Earnings Disappointment: The company’s recent report failed to inspire confidence. That is a fact from how the stock price responded so far, being 15%-19% down in afterhours and premarket. Post-earnings weakness often reflects longer-term concerns rather than a knee-jerk reaction, especially when the stock declines more than expected.
2. Overextension and Mean Reversion: After the initial plunge, a bounce fueled by short covering or bottom-fishing buyers may lift MU into technically significant price zones. Historically, such bounce levels often serve as better short entry points, allowing sellers to position at higher, more favorable prices.
3. Risk/Reward Profile: By waiting patiently for MU to rally into predefined “sell zones,” traders can set tight, controlled stops slightly above their average entry price. This creates an asymmetric risk profile, where the potential downside (profit) is significantly larger than the small controlled risk on the upside.

While the ForexLive.com AI indicated a mildly bullish tilt (+2) at the start of the premarket today, this can often signal nothing more than a short-term pivot or a modest recovery before renewed selling pressure emerges. The fundamental disappointment still stands, and if the bounce doesn’t translate into a sustained recovery, it’s more likely a setup for a strategic short.

The How: Executing the Short on Micron Stock via the ‘Levitan Method’
We are employing a scale-in strategy to achieve the ideal average entry price and maintain a high reward-to-risk ratio. This approach, sometimes known as the “Levitan Method,” involves building the short position in increments rather than all at once. We have identified two potential sell zones and laid out a step-by-step plan for each.

1. First Potential Short Zone ($94–$96):

   • Entry Steps:
     • Short ~14% of intended position at $94.32
     • Add ~29% of position at $95.13
     • Add ~57% of position at $96.37

   If fully filled, this results in an average entry price around $95.72.

   • Stop Loss: ~$96.87 (about 1.2% above average entry)
   • Profit Target: ~$87.68 (approx. 8% below entry)

   This structure yields a compelling reward-to-risk ratio of about 7:1, risking $1.15 per share to target around $8.04 per share in potential profit. If the bullish bounce fails and MU rolls over, this strategy captures the down-move efficiently. The following image summarizes the post-earnings trade idea for MU stock

2. Second Potential Short Zone ($97–$100):
   If MU’s rebound pushes higher, surpassing the first zone without allowing an ideal entry, we have a second opportunity.

   • Entry Steps:
     • Short ~14% of intended position at $97.15
     • Add ~29% of position at $98.20
     • Add ~57% of position at $100.12

   This scaling results in an average entry price around $99.15.

   • Stop Loss: ~$100.34 (~1.2% above average entry)
   • Profit Target: ~$90.82 (approx. 8.4% below entry)

   Similarly, the ratio remains about 7:1, risking $1.19 per share to potentially earn $8.33 per share. This is a higher entry point that might come into play if a more robust bounce unfolds.

Seeking to short sell MU stock, but not just from any entry

• What: We are looking to establish a short position in MU following a disappointing earnings report, but only after the stock rebounds into one of our predefined selling zones.
• Why: The fundamental weakness and overreaction on earnings suggest further downside. While short-term AI signals at ForexLive.com were mildly bullish, they likely point to a temporary bounce rather than a long-term reversal. By waiting for that bounce, we gain a better short entry and a highly favorable risk/reward setup.
• How: We use a scaled-in approach, setting multiple small short orders across a defined price range to achieve a strong average entry. A fixed stop loss (around 1–1.2%) above the final entry ensures manageable risk, while an 8–8.4% downside target offers substantial profit potential if the trade plays out as anticipated.

In essence, we are turning short-lived bullish optimism—a bounce predicted by AI and near-term traders—into a strategic window to short a fundamentally weakened stock at higher prices. This disciplined, structured plan provides a logical path to capitalizing on MU’s post-earnings volatility and potential mean reversion.