Ciena Corporation (NYSE: CIEN) seems to be gearing up for a surge as per its latest charts. Ciena Corporation provides network hardware, software, and services that support the transport, routing, switching, aggregation, service delivery, and management of video, data, and voice traffic on communications networks worldwide.
#1 Consolidation Area Breakout: As you can see from the daily chart, the stock was trading within a range for the past several months. This indicates consolidation. The consolidation area is marked as a pink color rectangle in the chart. Currently, the stock has broken out of this consolidation area. A breakout from a consolidation area generally indicates bullishness.
#2 Trading above MAs: The price is currently above its short-term moving average of 50-day SMA as well as the longer-time moving average of 200-day SMA. This implies a possible bullish bias for the stock.
#3 MACD above Signal Line: The daily chart shows that the MACD line (blue color) is currently above the MACD signal line (orange color). This is a possible bullish setup.
#4 Bullish ADX and DI: The ADX line has started to move up from below –DI and +DI lines. The +DI line and the ADX lines are also currently above the –DI line. This indicates possible bullishness.
#5 Bullish Aroon: The value of Aroon Up (orange line) is above 70 while Aroon Down (blue line) is below 30 in the daily chart. This indicates possible bullishness.
#6 Ascending Triangle Pattern Breakout: The weekly chart shows that the stock has currently broken out of an Ascending Triangle pattern. An Ascending Triangle pattern is a bullish pattern. This is marked on the chart in purple color lines. A breakout from this pattern typically indicates bullishness. The base of the triangle generally acts as a good support level after the breakout. The stock is also trading above the 50-week and 200-week SMA, indicating that the bulls are currently in control.
#7 Bullish MACD: The MACD line (blue color) is currently above the MACD signal line (orange color) in the weekly chart as well, indicating possible bullishness.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level for CIEN is above the price of around $72.50.
TP: Our target prices are $87 and $99 in the next 3-6 months.
SL: To limit risk, place a stop loss at $64.00. Note that this stop loss is on a closing basis.
Our target potential upside is nearly 20% to 37% in the next 3-6 months.
For a risk of $8.50, the target rewards are $14.50 and $26.50. This is a nearly 1:2 and 1:3 risk-reward trade.
In other words, this trade offers nearly 2x to 3x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down with high volume from the ascending triangle pattern. The sell-off of the stock could also be triggered in case of any negative news, overall weakness in the market, or any regulatory changes in its sector.
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