CIEN Stock: In Bullish Alignment
Ciena Corporation (NYSE:CIEN) stock brings back memories of the dotcom bubble that burst in 2000. So isn’t it appropriate that I revisit CIEN stock, an old relic of times past now that NASDAQ has surpassed the milestone that was set 17 years ago? I wish I could say that it was nostalgia that brought me back to Ciena stock, but my memories of the tech bubble bring back a recollection of an emotional roller coaster ride that left me a whole lot wiser, and a tad bit lighter in my pocket book.
I am focusing on CIEN stock because the stock chart has caught my eye. There is a compelling picture that has presented itself, and it is giving me reasons to believe that higher Ciena share prices will follow.
My beliefs are based on technical analysis, a method of investment analysis that I have been using for nearly two decades. My investment views and trading strategies are based on indicators and price patterns that are generated on a price chart. My strategy consists of scanning for a particular constructive price pattern. Price patterns that are supported by indicators have produced excellent trading results.
The following Ciena stock chart illustrates the pattern I have come across that is the basis of my bullish view.
Chart courtesy of StockCharts.com
The Ciena price chart above illustrates what bullish constructive price action looks like. Constructive price action consists of impulse waves that advance price, and consolidation waves that serve to unwind overbought conditions, and set up the next impulse wave. The alternation between these waves is what allows a trend to remain sustainable.
The consolidation wave that is illustrated above has developed into a symmetrical triangle. These price patterns are especially explosive because the converging trend lines that define this pattern act to confine space as time progresses. This confinement of space causes momentum to build within the pattern, which will finally be released when price exits the pattern. The bigger the triangle, the bigger the reaction when price finally exits it.
Ciena stock is currently sitting just above resistance outlined by the triangle. This serves to suggest that price has broken out of the triangle and a new impulse waves is now set to develop. The MACD indicator in the lower panel supports this view.
The moving average convergence/divergence (MACD) indicator is a simple trend-following momentum indicator that is generated when signal lines cross. These crosses are used to distinguish between bullish and bearish momentum. The bullish cross that was generated in November 2016 is suggesting that bullish momentum is now propelling CIEN stock higher, and a result, the path of least resistance is towards the higher prices. This supports the notion that a bullish breakout can occur at this stage.
The theory surrounding this wave structure can be used to project a potential target for the next advancing impulse wave. The theory states the next impulse wave has high tendency to match the initial impulse wave, in terms of length, and that the consolidation wave serves as a midpoint. Applying this theory to the wave structure above produces a price objective of $35.00. This price objective serves as an initial upside target.
The following CIEN stock chart suggests that the questionable breakout is, in fact, legitimate.
Chart courtesy of StockCharts.com
The bullish move off the November lows has been supported by a simple uptrend line. This uptrend is created by connecting the valleys that appear on the price chart. This bullish trend is easily identified by the higher highs and higher lows that are contained within this trend. This price action produces the infamous bullish chart where price moves from the lower left to the upper right. This trend line serves to define the level of risk in Ciena stock at any given point time, and trading above it suggests that the bullish trend is set to continue.
The resistance level that is highlighted in purple was just overtaken, and this level coincides with resistance that was outlined by the consolidation triangle. The breakout above this level suggests that higher prices are set to prevail, and this suggestion is supported by the bullish MACD indicator in the lower panel.
The chart above indicates on multiple levels that higher prices are likely. This bullish view is supported by the price action and indicators, which now suggest that an advancing impulse wave is set to develop.
Bottom Line on Ciena Stock
I am bullish on the prospects of Ciena stock going forward because the price chart is suggesting that price is on the verge of accelerating to the upside. My bullish view was created using the CIEN stock chart, and as long as the indications continue to suggest that such a view is warranted, I will remain bullish.