CIEN Stock Breaks Out, Putting My $50.00 Price Objective into Play

CIEN-Stock
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CIEN Stock: Incredibly Large Patterns Produce Incredibly Large Moves

We now sit in September, and let’s just say that I am not particularly fond of this month. September is notorious for being a poorly performing month for stocks. In fact, on average, it is the worst-performing month of the year.

I cannot change the date, but I can change what I am focusing on.

For instance, I am delighted to be focusing on Ciena Corporation (NYSE:CIEN) stock. The reason for my delight is that an extremely large technical price pattern that I have been watching develop on the CIEN stock chart has finally been completed.

I am really excited about this development because the implications of this completed price pattern are suggesting that Ciena stock is poised to a make a move toward much higher stock prices.

The technical price pattern I am referring to is highlighted on the following CIEN stock chart.

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Chart courtesy of StockCharts.com

The technical price pattern captured on the above Ciena stock chart is an ascending triangle.

Ascending triangles are very special price patterns that develop when the price action is characterized by a sequence that contains a series of higher lows and a static high.

I captured this pattern by connecting the peaks and troughs created by this price action. The end result was two converging trend lines that depict a triangle pattern.

These trend lines pinpoint where price resistance and price support reside. This is very important because the completion of this pattern will only occur when the stock price exits the pattern by breaking above price resistance or below price support.

On August 30, 2018, Ciena stock surged and closed the day higher by 12.45%. The catalyst that caused investors to bid up this investment was a better-than-expected third-quarter earnings report.

This surge in price was accompanied by a surge in volume. In the process, Ciena stock was finally able to break above price resistance, which resided at $28.00.

The breakout completed the ascending triangle and it is now suggesting that a powerful move toward higher prices is on the horizon.

The reason why a powerful move is now expected is because triangle patterns are known for such exact outcomes. When triangles develop, the confinement of space between price support and price resistance causes energy to build within the pattern. This stored energy is only released when the pattern is completed.

The size and scope of the pattern is directly related to the size of the move that is expected to follow. The ascending triangle on the CIEN stock chart has been in development for over seven years, making this an incredibly large pattern. Incredibly large patterns are expected to produce incredibly large moves, which is what I am currently expecting.

This idea that higher Ciena stock prices are now on the horizon is being reinforced by the notion that the ascending triangle also doubles as a consolidation wave. Its completion implies that an impulse wave is now in development.

These waves I just mentioned are highlighted on the following CIEN stock chart.

Chart courtesy of StockCharts.com

This chart captures an alternating wave structure consisting of impulse waves and consolidation waves, which are responsible for creating and sustaining trends.

The waves highlighted in green are impulse waves. Impulse waves capture the period in a bullish trend when a stock makes a sustained and progressive move toward higher prices.

The wave highlighted in purple is a consolidation wave. Consolidation waves capture the period in a bullish trend when a stock corrects and refrains from staging an advance.

As I mentioned earlier, the ascending triangle also doubles as a consolidation wave. Consolidation waves are very important in the development of a bullish trend because they create the necessary conditions so a new advancing impulse wave can follow.

The great thing about this wave structure is that aside from just suggesting that an impulse wave is currently in development, it can also be used to generate a price objective.

The price objective is based on the notion that consolidation waves act as midpoints in a bullish trend and, therefore, the impulse wave that follows has a tendency to mimic the impulse wave that preceded it. If I put this notion to work, it suggests that $50.00 is a viable price objective for the impulse wave now in development.

This $50.00 is not just some random number suggested by the wave structure. This price point also coincides with the horizontal level of price resistance, which is highlighted on the following CIEN stock chart.

Chart courtesy of StockCharts.com

The above CIEN stock chart highlights a horizontal level of price resistance that resides at $50.00.

This level of resistance was first established in December 2002. Ciena stock attempted to move beyond it in January 2004 and again in October 2007, but those attempts were thwarted.

I believe that this level of price resistance is now going to be tested once again, and all the technical indications I have outlined are the reasons why.

Analyst Take

I am bullish on the prospects of Ciena stock going forward. My bullish beliefs are based on the completion of a very large technical price pattern. This completed pattern is suggesting that powerful move toward higher CIEN stock prices is now in development, opening up the possibility that a level of price resistance that resides at $50.00 is going to be tested.