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CHART ANALYSIS


Ciena Signals A Continuation Higher

01/26/04 09:52:34 AM
by Arthur Hill

While the Nasdaqs are trading well above their January 2003 highs, Ciena (CIEN) has struggled most of 2003 and only recently moved above its January 2003 reaction high. The stock forged a 52-week high this month and the recent breakout projects higher prices over the next few weeks and months.

Security:   CIEN
Position:   Buy



Figure 1: Daily chart of Ciena.

The daily chart shows the strength of the breakout. CIEN tested support just below 6 three times (gray arrows) and then shot above 7 with a series of gaps from December 31 to January 16. These gaps have held and should be considered breakaway gaps. In addition to the gaps, volume expanded on the advance and this shows new buying pressure. The high volume advance solidifies the lows around 5.7 and further upside should be expected as long as this major support level holds (thick green line).

Figure 2: Weekly chart of Ciena.
Graphic provided by: MetaStock.
 
The weekly chart offers perspective and provides an upside target. The stock advanced from 2.41 to 7.74 and then consolidated from Jan-03 to Jan-04. Relative to the prior advance (Oct-02 to Jan-03 or four months), the 11-12 month consolidation was a bit long. Although not perfect, the pattern looks like an elongated symmetrical triangle and the breakout signals a continuation of the Oct-02 to Jan-03 advance. The first upside target would be the Mar-02 high around 11 and the second upside target would be the Oct-01 high around 22. These levels could create a resistance zone with a median target around 16.5 (22 + 11 = 33, 33/2 = 16.5)



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
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