Arold eyes Micron, adds SXC Health

Michael Arold of the Technical Swing model has memory chipmaker Micron Tech (MU) in his sights as a possible buy candidate following this week’s earnings miss.

“If it doesn’t sell off too much more following the report, that’s a strong sign that everyone else has sold already and there’s upside to come,” Arold says.

The chipmaker posted higher-than-expected sales on weak margins, especially on NAND flash memory. Shares sold off as much as 5% on the report.

Yet the company also is coming out with new products, which he notes should help to improve margins in the future. The long-term support Arold is watching is around $5.

New purchases for the model this week include Steel Dynamics (STLD) at around $11. Arold now holds a position worth less than 5% of his total portfolio. He thinks that the stock is in the process of bottoming, and that months of selling now are exhausted.

“A radical reversal could always happen, but it’s moving to the upside and I want to hold the position as long as possible,” Arold said. “I see potential for it to go to $13 or $14.

Another new buy is SXC Health Solutions (SXCI) at $95, initially taking a position worth about 10% of his portfolio. The stock trades at 32 times earnings, but consistently reports strong double-digit sales growth with little debt on the balance sheet.

What Arold likes most, however, is price momentum in the stock as it approaches $100, out of several months of sideways price movement.

Also of note, Arold took a profit on his former top holding, Ross Stores (ROST), dropping about 30% of his total position.

“But I could still see this stock developing into a long-term position based on its momentum,” he said. “As long as it’s still outperforming the S&P 500, I’m on board.”

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