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JDS Uniphase — Short Again?

04/26/07 08:13:23 AM
by Koos van der Merwe

JDS Uniphase seems to have fallen on hard times, falling from a high in March 2006 after an attempted recovery.

Security:   JDSU
Position:   Sell

On March 17, 2000, JDS Uniphase reached its zenith, hitting a high of $34.02, and from then it has fallen — and fallen and fallen. It hit a low of $13.94 on November 2006 and flew up to a high of $19.66 by the end of that month. Since then it has fallen steadily, whereas the Dow Jones Industrial Average stocks have recovered and reached new highs and NASDAQ stocks have languished, and hope of a strong recovery has faded.

Recently, however, the stock appears to be forming a cup and handle pattern, suggesting possible strength in the future, but only if the handle is broken in an upward move. Figure 1 shows how the price has recently broken the downtrend resistance line, suggesting a major buy signal.

FIGURE 1: JDS UNIPHASE. Here, the buy/sell highlights of the voting line can be seen.
Graphic provided by: Omnitrader.
Figure 1 also shows the following:

a. The chart shows that a buy signal on a Fisher MACD indicator was given on March 20. This was confirmed on April 5 by a stochasticRSI signal.
b. The vote line shows that a short signal was given on March 30. This lasted until the vote line gave a buy signal on April 3. The buy signal, given when the price was at $15.19, gave a profit of $0.75 when the price was at $15.94.
c. The vote line has now suggested a short signal, confirmed by the stochRSI, which is overbought. The target is $14.83, the major support line.

d. We can argue that the price has fallen to the "fill the gap" level, and it should now turn and start moving up to test the high of $17.16, the previous major pivot point. This is possible, but I would wait for the stochRSI and vote line to give a buy signal before I become a bull.

JDS Uniphase is typical of all NASDAQ stocks, and shows why the NASDAQ has not performed as well as the Dow industrials, which last week reached new highs. Is the NASDAQ index a laggard, or is it a precursor of what could come. So far, Fed chairman Ben Bernanke, after a few false starts, is excelling in keeping the US economy out of a recession. Could the weight he is carrying become too heavy?

Koos van der Merwe

Has been a technical analyst since 1969, and has worked as a futures and options trader with First Financial Futures in Johannesburg, South Africa.

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Date: 04/26/07Rank: 2Comment: 

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