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Outlook For JDS Uniphase Still Bearish

09/24/04 09:06:18 AM
by Arthur Hill

Despite what appears to be a four to five month base for JDS Uniphase, the outlook clearly favors the bears.

Security:   JDSU
Position:   Sell

Figure 1: JDSU weekly chart.

The weekly chart sets the stage and the overall bearish outlook. After a sharp decline in 2002, the stock retraced 38% with a rising wedge in 2003. The wedge peaked just above 5 in January 2004 and the stock broke below the lower trendline with a sharp decline in April. Since this trendline break, the stock managed to firm around 3 with a consolidation over the last four to five months.

Figure 2: Daily chart of JDSU.
Graphic provided by: MetaStock.
Turning to the daily chart, it is clear that a head and shoulders pattern has evolved over the last 12 months. The prior move was up (Oct-02 to Jan-04) and the pattern is a bearish reversal. The left shoulder formed in Sep-03, the head in Jan-04 and the right shoulder in Jun-04. The head reflects a failure to hold the January advance and the right shoulder shows a lower high, which reflects the inability of buyers to push prices back to the highs of the head. The neckline slopes down and this indicates lower lows, which reflect selling pressure.

The right shoulder holds the key. The stock dipped below 3 in May, July and August, but managed to bounce back each time. A support zone formed between 2.84 and 3 (green rectangle). A move below 2.84 would break the support zone and argue for further weakness. Should the stock manage to hold support at 3, it would take a break above 4 to exceed the high of the right shoulder and turn bullish.

Those looking for an even quicker signal can turn to the small flag that formed over the last two weeks (magenta trendlines). A move above 3.7 would be bullish and a move below 3.4 bearish.

Arthur Hill

Arthur Hill is currently editor of, 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 and the main contributor to the ChartSchool.

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Date: 09/24/04Rank: 4Comment: 

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