This Is Why I Believe That CIEN Stock Has $50.00 Written All Over It

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CIEN Stock: Anticipating a Bullish Outcome

The markets are currently in a state of duress because of the escalating nature of the trade war being waged. As a result of tenuous market conditions, investors are seeking shelter on the sidelines, and their flight to safety is why bonds and the dollar are continuing to appreciate.

Even though the market conditions are not adequate, I continue to carry a bullish bias because none of the indices has broken down below key levels of price support. Until such an event occurs, I will continue to look for investments that are setting up to make a move toward higher stock prices.

Currently, I have Ciena Corporation (NYSE:CIEN) stock on my radar because I have the inclination to believe that Ciena stock is going to hit $50.00 in the not-too-distant future.

This price target is not arbitrary, by any means. I am using $50.00 as a price objective for CIEN stock because this price point is a significant level of horizontal price resistance.

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This horizontal level of price resistance is highlighted on the following stock chart.

Chart courtesy of StockCharts.com

The above stock chart highlights a horizontal trend line that resides at $50.00. This trend line represents a significant level of price resistance that was first established in December 2002. It was revisited in January 2004 and again in October 2007.

Every time this price point was tested, it prevented the stock price from advancing beyond it, which is why this price point is significant.

I believe that this level of price resistance is going to be tested once again, in the not-too-distant future. The reason I believe this is that there is a powerful technical price pattern currently in development underneath this level of price resistance, and it is approaching completion.

This powerful price pattern is highlighted on the following chart.

Chart courtesy of StockCharts.com

The technical price pattern highlighted on this Ciena stock chart is an ascending triangle. These patterns develop when the price action is characterized by a sequence containing a series of higher lows and a static high.

Connecting the peaks and troughs that were generated by this price action created two converging trend lines. These trend lines captured the ascending triangle by pinpointing where price resistance and price support reside.

This is important information, because the completion of this pattern will be determined when Ciena stock either breaks above price resistance or falls below price support. Once the pattern is complete, an explosive outcome is expected to follow.

Triangles are powerful patterns, and the reason they produce explosive breakouts is that the contraction of space between support and resistance causes momentum to build within the pattern. The longer this pattern is in development, the larger the reaction that can be expected to follow once it is resolved.

This ascending triangle is currently in its seventh year of development, making it a very large pattern. As result, a very large and powerful move is expected to follow.

On average, triangle patterns reach a resolution when 70% of the pattern is complete. The triangle pattern highlighted on the above stock chart is approaching that marker, which is why I believe Ciena stock is likely to move higher in the near future.

The reason why I believe higher stock prices are likely to follow is that the ascending triangle is part of a much larger wave structure that is favoring such an outcome.

This wave structure is highlighted on the following CIEN stock chart.

Chart courtesy of StockCharts.com

This chart has been annotated in order to highlight an alternating wave structure that is responsible for creating and sustaining a trend.

This wave structure contains impulse waves and consolidation waves.

The wave highlighted in green on the above chart is an impulse wave. Impulse waves capture the stage in a bullish trend when a stock sustains a move toward higher prices.

The wave highlighted in purple is a consolidation wave. Consolidation waves capture the stage in a bullish trend when a stock price corrects and refrains from advancing. This wave is an essential part of every bullish trend because it creates the conditions that are necessary for an impulse to follow.

The ascending triangle currently in development doubles as a consolidation wave and, when it is completed, an impulse wave is likely to follow.

The great thing about this wave structure is that, aside from just implying the direction of the next move, it can be used to create a potential price objective for CIEN stock.

This price objective is obtained based on the notion that impulse waves separated by a consolidation wave tend to mirror each other. If I apply this method, assuming a bullish outcome, it suggests that $50.00 is a plausible price objective.

This price objective coincides with the horizontal level of price resistance that I originally highlighted, reaffirming why I believe that this level of resistance may be tested soon.

Analyst Take

A very large technical price pattern is in development on the Ciena stock chart, and I have reason to believe that, if this pattern is resolved in a bullish manner, CIEN stock will likely test $50.00 in short order.