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Just over a week ago, leading chipmaker Nvidia (NVDA) was almost in freefall…
Chinese start-up DeepSeek triggered the dramatic sell-off by claiming that it had developed an AI model for a fraction of the cost of its U.S. rivals (including ChatGPT).
By the time the dust settled, NVDA had lost 17% in a day and seen nearly $600 billion wiped from its market valuation.
That selling carried over into other tech stocks and the major indexes.
One other chipmaker that fell heavily that day was Micron Technology (MU). It closed down around 12% on the day – and around 18% below its recent January high.
Despite widespread pessimism across the market, MU’s down move looked overdone. And signals told me that MU was due for a bounce.
So we entered a position on January 29 to capture that move. And we closed it out just two days later for a 56.5% gain.
So let’s check out how we did it…
Watching Key Levels
I watch support (and resistance) levels closely. I encourage you to watch them too…
When a level gets tested and holds, the stronger it becomes. In the case of MU lately, that’s the $85 level (the green line).
Although you can’t see it here, MU held support at $85 in August after reversing sharply from its June peak ($157.53) – a fall of 46%.
Then MU found support at $85 again in September.
Then its earnings disappointed the market, and MU gapped lower in December. But again, the $85 support held despite MU testing that level multiple times.
Take a look below:
Micron Technology (MU)
Source: eSignal
So when MU gapped lower on January 27 due to the DeepSeek meltdown, strong price history told us that MU would likely hold that level.
Additionally, the Relative Strength Index (RSI) showed us that buying momentum was returning (orange circle).
So we bought a call option that would increase in value if MU rallied.
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Staying Nimble
As you can see, we got our timing spot on. MU immediately rallied off its low.
With our position in good profit, we closed it out just two days later for a solid 56.5% profit.
Take another look:
Micron Technology (MU)
Source: eSignal
Rather than flailing in the aftermath of the DeepSeek news, we stayed nimble and disciplined. That enabled us to snare a quick gain while other folks were still panicking and processing.
Traders are going to increasingly need that kind of resilience in 2025.
This is not going to be the last surprise of the year. (After all, we’re still waiting to see how President Trump’s tariffs play out.)
So our job is to nail our entries when the right setups appear. And just as quickly, we have to be ready to take our profits off the table.
If we can do that, we’ll be one step ahead of the crowd… and on our way to making 2025 a very profitable year.
Happy Trading,
Larry Benedict
Editor, Trading With Larry Benedict