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STOCHASTICS


CIEN Gets Some Liftoff

10/31/08 09:56:59 AM
by Arthur Hill

After spending the better part of four months in oversold territory, Ciena is finally getting some lift with a triangle breakout and improving momentum.

Security:   CIEN
Position:   Accumulate

Figure 1 shows daily bars over the last seven months. Ciena (CIEN) declined from the mid-30s to single digits over this time frame and became oversold numerous times. Note how the stochastic oscillator dipped below 20 three times and was actually below 20 most of the time since late May. With a small bounce over the last few days, the stochastic oscillator broke above 50 and to its highest level since May. Something might be happening here.

FIGURE 1: CIEN, DAILY. Over the last seven months, this stock declined from the mid-30s to single digits.
Graphic provided by: TeleChart2007.
 
In addition to a stochastic oscillator breakout, the stock broke the trendline extending down from May with an advance over the last few days. It is not a major breakout but did occur on above-average volume, and this could give way to an oversold bounce. Such a move could carry CIEN back into the gap zone around 14-16 (red box). Keep in mind this is the target based on the daily chart.

FIGURE 2: CIEN, HOURLY. The stock formed a triangle over the last few weeks and broke triangle resistance.
Graphic provided by: TeleChart2007.
 
The 60-minute chart expands on recent price action with a focus on the breakout (Figure 2). The stock formed a triangle over the last few weeks and broke triangle resistance. The volume breakdown confirms expanding volume on the upside, and the on-balance volume (OBV) also broke resistance. Volume and OBV validate the triangle breakout. The triangle extends around two points from low to high, and this can be added to the breakout point for an initial upside target. With a breakout around 9, I would put the first target around 11.



Arthur Hill

Arthur Hill is currently editor of TDTrader.com, a website specializing in trading strategies, sector/industry specific breadth stats and overall technical analysis. He passed the Society of Technical Analysts (STA London) diploma exam with distinction is a Certified Financial Technician (CFTe). Prior to TD Trader, he was the Chief Technical Analyst for Stockcharts.com and the main contributor to the ChartSchool.

Title: Editor
Company: TDTrader.com
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E-mail address: arthurh@tdtrader.com

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Date: 11/02/08Rank: 5Comment: 
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