🚨 Watchlist Update: Multiple Buy Levels Triggered
Several stocks from our Top 10 Breakout Watchlist this week have already cleared their recommended buy levels. Here’s a quick rundown:
Sandisk Corporation (NASDAQ: SNDK) broke out of a flag pattern and cleared our buy level of $1,660.00. The stock closed at $1,786.85 — already an ~8% move above entry, with an intraday high of $1,827.99.
Applied Optoelectronics, Inc. (NASDAQ: AAOI) broke out of a downtrend channel and pushed through our buy level of $152.00, closing at $154.89 — with an intraday high of $160.99.
Intuitive Machines, Inc. (NASDAQ: LUNR) broke out of a falling wedge pattern and cleared our buy level of $20.10, closing at $20.38 — with an intraday high of $20.84.
Bottom line: Use trailing stops to lock in early gains and let the winners run. And now, on to today’s featured setup…
Fabrinet (NYSE: FN) just broke out of a multi-month bull flag on a decisive +4.97% single-session surge — and looks headed even higher.
As we’ll get to just ahead, the combination of a record earnings beat with strong forward guidance, surging demand from AI-driven data center buildouts, and a fresh technical breakout makes FN one of the more interesting setups on the board. Here’s what’s going on…
The Themes Behind the Move
Fabrinet is a Thailand-based contract manufacturer that designs, builds, and packages advanced optical components, high-speed transceivers, and precision electro-mechanical products for many of the world’s largest telecom, data center, industrial-laser, medical-device, and automotive customers.
In plain English, when a hyperscaler needs a high-speed optical module to move terabytes of data between AI servers — or when a giant like NVIDIA or Cisco needs a specialized optical transceiver built to spec at scale — Fabrinet is one of the very few contract manufacturers in the world with the yield, precision, and clean-room capacity to actually build it. Its business hinges on hyperscaler AI-infrastructure spending, the transition to next-generation optical interconnects (800G and 1.6T), and its ability to bring new capacity online in step with that customer demand.
FN’s latest move reflects a powerful confluence of developments — commercial, operational, and strategic — that have come together in rapid succession to fundamentally reframe the company’s near-term growth trajectory.
| Theme / Catalyst | What Happened | Why Traders Care |
|---|---|---|
| Record Q4/FY2026 earnings beat + strong guidance | On August 17, Fabrinet reported record Q4 revenue of $1.316 billion (+45% YoY, beating estimates and the high end of guidance) and non-GAAP EPS of $4.10 (vs. ~$3.81 consensus). Full-year FY2026 revenue landed at $4.64 billion (+36% YoY) with non-GAAP EPS of $14.09 (+39%). Management guided Q1 FY2027 revenue at $1.375 billion to $1.425 billion (~43% YoY growth at the midpoint) with EPS of $4.10–$4.25. | Beating on both top and bottom lines and guiding well above street expectations is a rare “beat and raise” combination. It confirms Fabrinet’s manufacturing capacity is successfully capturing the surge in optical component demand — and puts to rest, at least for the near term, worries that the AI-optics build-out is slowing. |
| Data Center revenue surges 68% YoY | Q4 Data Center revenue hit $669 million, surging 68% year-over-year and 13% sequentially. The segment now makes up roughly 51% of Fabrinet’s total revenue, and its Data Center Interconnect (DCI) products have officially crossed a $1 billion annualized run rate. | Data Center is no longer a growth pocket — it’s now more than half the business, and it’s growing three times faster than the rest of the company. That mix shift is exactly what investors reward: rising exposure to the highest-growth end market, faster, at scale. |
| Sector tailwinds — AI & optical interconnect | Fabrinet sits directly in the path of the hyperscaler AI-infrastructure super-cycle. The transition to 800G and 1.6T optical transceivers and next-generation co-packaged optics requires complex, high-yield manufacturing that only a small handful of firms can execute at scale. FN is the tier-1 manufacturing backbone for anchor customers like NVIDIA, Cisco, Nokia, and Amazon. | Advanced optical packaging remains one of the true bottlenecks of the AI build-out — and Fabrinet gets paid on the capacity side of that bottleneck rather than the component-design side. It’s a pure-play manufacturing lever on hyperscaler capex, without the customer-concentration risk of designing any one part. |
| Fundamentals & capacity expansion | FY2026 revenue of $4.64 billion, GAAP net income of $473 million, and a cash balance of ~$876 million back a healthy balance sheet. Operating margin printed a three-year high near 10.9%. Ongoing capacity expansion — Thailand Building 10 (~2M sq ft) targeted for early 2027 completion, plus additional U.S. sites — is designed to lift long-term annual revenue capacity to $12.5–$14 billion. | The capacity plan tells you where management thinks demand is going: from a ~$5B run rate today toward $12–14B over time. That’s roughly a doubling to tripling of revenue potential — a multi-year growth runway now baked into the physical footprint. |
| Analyst coverage | Among the 10 analysts covering FN, the average 12-month price target sits at $643.00, with a high of $800.00 and a low of $452.00 — implying roughly 7% upside to the mean and ~34% upside to the high end. Recent moves include Needham maintaining Buy with an adjusted PT to $650 on July 22, Barclays raising its PT to $702 in May 2026, and JPMorgan moving to Neutral with a $680 target. | Most of these targets were set before yesterday’s record print and raised guidance. With Q4 numbers now materially ahead of what was modeled, the coverage universe is likely to reset higher over the coming weeks — and the $800 high end already points to substantial upside from current levels. |
| Market conviction signal | The breakout move came on a decisive +4.97% single-session gain with volume ticking above recent averages, pushing FN cleanly through the upper boundary of a three-month bull flag and reclaiming both the 50-day and 200-day moving averages in the same session. Customer concentration is meaningful but healthily diversified — Cisco (~20%), NVIDIA (~16%), Nokia (~11%), and Amazon (~11%) each anchor part of the book. | Breaking out of a multi-month flag on volume, reclaiming both major moving averages in the same session, and doing it on a hard-news earnings catalyst is exactly the tape signal that suggests institutional money is buying conviction rather than chasing momentum. |
| Upcoming triggers | Traders are watching the Rosenblatt 6th Annual Age of AI Technology Summit fireside chat on August 18 at 1:00 p.m. EDT, the European Conference on Optical Communication (ECOC) in September 2026, Q1 FY2027 earnings expected in early-to-mid November 2026, and the progressive commissioning of Thailand Building 10 through 2027 as new capacity comes online. | A staggered set of high-conviction catalysts — a same-day AI conference appearance, a marquee industry event in September, next earnings in November, and capacity milestones running through 2027 — each capable of independently keeping the stock in play through the balance of the year. |
If needed, swipe or scroll sideways to view the full table.
Put it all together, and FN is looking less like a cyclical contract manufacturer facing a rich valuation and more like the indispensable manufacturing backbone of the AI infrastructure build-out — with record revenue, accelerating hyperscaler demand, and a multi-year capacity plan that could nearly triple its revenue ceiling.
The story is getting stronger by the week, but the chart is what could determine whether this move has more room to run in the near term. Here are the bullish technical signals traders should be watching now.
Bullish Technical Signals
#1 Flag Pattern Breakout with Volume Expansion (Daily): FN has resolved a textbook bull flag on the daily chart. The “pole” is the powerful August 2025–May 2026 advance that carried the stock from the ~$280 zone to the ~$750 peak — a near-triple over roughly nine months. The “flag” is the orderly, downward-sloping consolidation that followed, price drifting inside a well-defined channel (purple) for roughly three months as the stock digested the run. That pause did its job — it flushed overbought readings, shook out late longs, and reset the momentum picture without surrendering the structural gains. Today’s session cleared the flag’s upper boundary on a decisive +4.97% candle with volume ticking above recent averages — exactly the confirmation the pattern demands, since breakouts without volume are the ones that quietly fail. Because flags are continuation patterns by construction, the resolution argues the larger uptrend is resuming rather than starting fresh. The prior resistance shelf at $576.60 now flips into first-line support, and the measured-move objective from the pole comfortably brackets the upside targets below — pattern and price objectives corroborate one another.
FN – Daily Chart
#2 Price Above the Moving Averages (Daily): FN closed at $598.58, trading above both its 50-day SMA ($529.70) and 200-day SMA ($537.36) — a meaningful reclaim given the stock spent much of the July drawdown pinned beneath both. The two averages are tightly clustered in the $530s and now sit ~$60 below current price, forming a layered dynamic-support shelf that buyers can defend on any retest. The higher-timeframe weekly moving-average structure (covered in #5) is unambiguously golden-cross aligned, so the longer-term backbone is doing the structural heavy lifting while the daily plays catch-up.
#3 Bullish ADX and DI Configuration (Daily): The ADX read here is textbook early-trend. +DI (30.98) sits decisively above –DI (20.46) — a spread of over 10 points — which places directional pressure firmly on the buy side and tells you buyers, not sellers, are dictating the tape. But the more consequential half of the signal is ADX itself, which prints at just 16.94 — below the 25 threshold that denotes a defined trending market and, critically, still sitting beneath both DI lines. Because ADX is direction-agnostic and measures only trend strength, a low-and-rising reading beneath both DI lines is the indicator’s way of flagging that a new trend isn’t just forming, it’s still in its opening chapter with meaningful runway to expand. This is a structurally higher-quality setup than a mature ADX print in the 40s or 50s, where the trend is well-established but closer to exhaustion — here, the move has room to build force before the indicator starts flashing late-cycle warnings. Stacked against the flag breakout and the Aroon signal, the ADX/DI picture is corroborating the same story from a different angle: directional control has flipped to buyers, and the trend that’s forming has yet to spend its energy.
#4 Bullish Aroon (Daily): Aroon Up is pinned at the ceiling at 100 while Aroon Down sits near 7 — about as clean a bullish configuration as this indicator produces. Aroon Up at 100 means FN has printed a fresh high within the lookback window very recently, consistent with today’s breakout candle, while the near-zero Aroon Down confirms sellers have effectively gone quiet. The wide separation between the two lines argues the trend transition isn’t fragile or contested — it’s decisively one-sided in favor of buyers, with little internal conflict for the tape to work through.
#5 Above Support Area with Price Above 50-Week and 200-Week SMAs (Weekly): Zooming out, the weekly chart shows FN reclaiming the pink-dotted horizontal at $542.62 — a level that had acted as resistance during earlier ranges and is now flipping into support. Levels that successfully invert roles from resistance to support are the ones the market genuinely respects, so this handoff carries structural weight. Compounding the signal, price sits comfortably above both its 50-week SMA ($513.88) and 200-week SMA ($272.61), with the 50-week stacked well above the 200-week — the golden-cross alignment that keeps the multi-year structural uptrend firmly intact. The gap between the two weekly averages (over $240) tells you this is a mature, well-established uptrend, not a fledgling one just finding footing. The horizontal support and the weekly MA stack corroborate each other rather than duplicating the same reading — a horizontal defense at $542, then dynamic support at $513, then the long-term floor near $272.
FN – Weekly Chart
#6 Bullish RSI (Weekly): Weekly RSI prints at 55.79 and is trending higher above its signal line at 49.65 — a two-part confirmation worth unpacking. Crossing and holding above 50 confirms that buying momentum structurally outweighs selling pressure on the higher timeframe, where signals carry more weight than their daily counterparts. The continued upslope rules out a stalling read, indicating instead that momentum is building rather than plateauing. Just as importantly, at 55.79 the RSI has meaningful runway before it reaches the 70 overbought zone where the signal starts to work against the move — the tank still has fuel before momentum bumps into a ceiling.
#7 Bullish Stochastic from Oversold (Weekly): %K sits at 59.26 above %D at 51.75 on the weekly chart, with both lines climbing sharply out of oversold territory near the 20 zone that was carved during the July lows. Crossovers alone can be noise, but a crossover emerging from oversold on the weekly timeframe is one of the higher-conviction combinations this oscillator produces — it signals that selling pressure was fully wrung out at the recent trough and buyers are stepping back in with conviction. On the weekly, these transitions typically mark the start of durable multi-week moves rather than quick countertrend bounces. With both lines still mid-range rather than pressed into overbought, there’s ample runway before momentum flags exhaustion. This is where multi-timeframe confluence earns its keep: the daily flag breakout, the weekly RSI reclaim, and the weekly stochastic turn from oversold are all firing in the same direction — and when daily and weekly agree, the signal carries more weight than either would alone.
Risks to Consider
Even strong setups can fail, especially in a high-multiple AI-infrastructure name like Fabrinet. A few things could knock the stock off course:
- A breakdown back below the bull flag’s upper boundary on heavy volume would invalidate the breakout thesis
- Negative company-specific news or broader market weakness — any rotation out of AI-infrastructure or optical-networking names would pressure the entire group
- After-hours reaction — despite the clear beat and raise, the stock sold off ~7% in after-hours trading, suggesting some investors questioned whether guidance fully matched the most optimistic expectations; that near-term digestion could keep volatility elevated
- Valuation premium — FN trades at a trailing P/E in the low-to-mid 50s after the run-up, leaving limited margin of safety if growth decelerates or any single quarter disappoints
- Heavy capex is temporarily suppressing free cash flow (near break-even or slightly negative for the year after the buildout), with inventory and PP&E rising into the capacity ramp
- Customer concentration — top customers Cisco, NVIDIA, Nokia, and Amazon collectively represent well over half of FY2026 revenue; execution slippage on any single major program or a share shift among optical suppliers could pressure results
- Competition and share dynamics in advanced optical manufacturing could compress margins or chip away at FN’s tier-1 position over time
- Insider activity — recent filings include tax-withholding sales on equity vesting (e.g., COO) rather than discretionary dumping, but the ongoing activity remains a modest sentiment overhang
The Bottom Line
FN is breaking out of a multi-month bull flag on the daily chart while reclaiming a key resistance-turned-support level and holding above both weekly moving averages — a dual-timeframe technical setup that historically signals the start of a sustained move higher.
The fundamental story underneath the chart is just as strong: a record Q4 revenue beat at +45% YoY with EPS of $4.10, Data Center revenue surging 68% YoY to $669 million, and Q1 FY2027 guidance implying roughly 43% YoY growth at the midpoint.
Combine that with multiple commercial and operational catalysts staggered through year-end and into 2027 — the Rosenblatt AI summit fireside chat today, ECOC in September, Q1 FY2027 earnings in early November, and the progressive commissioning of Thailand Building 10 through 2027 — and FN looks like one of the more compelling risk-reward setups on the board right now.
If this is a trade you want to get in on, here’s how we’d play it. Because FN’s post-earnings action opens the door to two clean entry paths, we’re providing both a breakout setup for a decisive move above the flag and a pullback setup for a retest of prior resistance-turned-support. Below you’ll find the exact entry levels, both price targets that imply 15%–28% potential upside depending on your entry, and the stop-losses we’re using to manage the downside.
Recommended Trade Setup
Case 1 — On Breakout
| Item | Detail |
|---|---|
| Buy Level | Above approximately $611.00 |
| Price Target 1 | $700.00 — Potential upside: 15% |
| Price Target 2 | $740.00 — Potential upside: 21% |
| Timeframe | Next 3–6 months |
| Stop-Loss | $570.00 on a closing basis |
| Trade Invalidation | Void if price hits stop-loss before entry triggers |
If needed, swipe or scroll sideways to view the full table.
For a risk of approximately $41.00 per share, the target rewards are about $89.00 and $129.00 per share. That makes this roughly a 1:2 and 1:3 risk-reward trade. In other words, the setup offers nearly 2x to 3x more potential upside than downside.
Note on Trade Invalidation: This recommendation stays active as long as the technical structure holds. If FN drops to or below the $570.00 stop-loss before the $611.00 entry triggers, the trade is automatically void — the support underpinning the thesis would have broken, and the risk-reward setup would no longer justify entry. Given the ~7% after-hours reaction, this is a real near-term scenario to keep in mind.
Case 2 — On Pullback
| Item | Detail |
|---|---|
| Buy Level | On pullback to approximately $576.00 |
| Price Target 1 | $700.00 — Potential upside: 22% |
| Price Target 2 | $740.00 — Potential upside: 28% |
| Timeframe | Next 3–6 months |
| Stop-Loss | $525.00 on a closing basis |
| Trade Invalidation | Void if price hits stop-loss before entry triggers |
If needed, swipe or scroll sideways to view the full table.
For a risk of approximately $51.00 per share, the target rewards are about $124.00 and $164.00 per share. That makes this roughly a 1:2 and 1:3 risk-reward trade as well. In other words, this setup also offers nearly 2x to 3x more potential upside than downside — with a lower entry that improves the reward-to-risk profile further if the pullback triggers cleanly.
Happy Trading!
Tara and Greg
🥈 Almost Made the Cut
Today’s featured trade, Fabrinet (NYSE: FN), was our top pick of several breakout candidates we evaluated. The following two stocks were strong candidates that made it to the final round — they came up just short of the top spot, but remain on our watchlist and could be featured soon:
Almonty Industries Inc. (NASDAQ: ALM) — Almonty combines a textbook weekly value-area accumulation setup with one of the strongest catalyst packages in the group: its Sangdong tungsten project is moving into full commercial production, an expanded long-term offtake agreement is in place, tungsten prices are surging on defense and semiconductor demand, and the company has authorized a fresh $300 million share-repurchase program. With the stock reclaiming both its weekly moving averages and pushing toward the $22.50 value-area high, ALM offers particularly attractive absolute upside, although its higher-beta commodity exposure and near-term delisting transition make the setup somewhat less predictable than FN.
VIAVI Solutions Inc. (NASDAQ: VIAV) — VIAVI pairs a favorable weekly technical structure with direct exposure to the same optical-networking and AI-infrastructure tailwinds driving FN, along with steady growth in its optical security and test-and-measurement franchises. A constructive setup and meaningful upside potential keep it on the watchlist as a credible follow-up idea, though its narrower catalyst path relative to FN’s blowout earnings print kept it just outside the top spot for today.
