(Note: The author of this fundamental analysis is a financial writer and portfolio manager.)

One trader is making a big bet in options of Micron Technology Inc. (MU), with large volume trading in the September 15, $33 calls and $36 calls. The stock price is seeing a significant bump higher Wednesday of nearly four percent, to around $30.50, after Mizuho Securities put out a bullish note on the stock. Still, despite the recent bullishness, the shares aren't completely out of the woods yet but have come a long way since being on the verge of a breakdown last week. (See also: Micron's Stock Near a Breakdown.)

The Bullish Bet

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The option volume in the $33 strike price for expiration in September is at roughly 35,000 contracts, almost double the number of contracts on the open interest at the start of the day. But there was one big trade of 20,000 contracts traded early in the day, in addition to another 20,000 contracts traded at the $36 strike.

The trade resembles a bull spread, indicating the trader is expecting Micron shares to rally above $33.45 – strike price plus the net premium paid – but remain below $36. The trade appears to have sparked some animal spirits, with volume at the $33 strike price surging throughout the day.

This Way Or That Way

In the Investopedia article published on August 3, we noted that the greatest concern for Micron stock was a breakdown in the stock price around the $26 level. That would be a key technical support level that could have sent shares lower to around $23. Since that time, Micron shares have held nicely around $27.50, and surged back higher.

This sets up an interesting battle line in the stock. There is a technical resistance area along the stock's previous highs, which come into play currently around $31.50. A break above $31.50 likely breaks the stock out and sends it higher as the options trader is betting happens.

However, should the stock be unable to surge through the resistance level, it would likely back off and trade lower, again putting the lower support level back into play.

For now, the market seems to be going back and forth like a game of ping-pong regarding the future direction of Micron. The stock is trading mostly sideways since the beginning of June, making a series of lower highs, and lower lows.

It wouldn't be surprising to see the stock stay within the range for some time, but you need to pay particular attention to both sides of the charts, as a breakout on either side would get shares moving. At least for now, it appears one trader is making a bullish bet using options.

Michael Kramer is the Founder of Mott Capital Management LLC, a registered investment adviser, and the manager of the company's actively managed, long-only Thematic Growth Portfolio. Kramer typically buys and holds stocks for a duration of three to five years. Click here for Kramer's bio and his portfolio's holdings. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Past performance is not indicative of future performance.

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