JRI,
I maintain CIEN to be an excellent short. That story has not played out yet. Earnings are Thursday, and if CIEN disappoints (as I think they will), IMHO you will see one big move in CIEN. I am short now, however, since I think it reasonably likely that the move will begin sooner than Thursday. The chart suggests this, although there are still technical buy signals present:
askresearch.com
Note the textbook perfect volume envelope the last six trading sessions: volume linearly gathers momentum on the downside, and linearly loses momentum on the upside.
Technically, it is still too early to short CIEN, but I'm short anyway, partly because I think the probabilities are heavily in my favor, partly because I don't see much upside risk, given the resistance at 87, and partly because I think the downside move might well be swift and massive.
Regarding the time of day, I rarely have the luxury (or the inclination) to sit in front of a computer all day long. Most of the action is in the first and last hours anyway. I trade mostly at the open, almost always during the first 30 to 40 minutes. But, another pattern I look for is a breakout late in the session. Not infrequently, all the moving averages will converge horizontally going into the last two hours of trading, and coincide with the stock price. When I see this happen, I will watch for a break one way or the other on the five minute chart. MACD tends to be a fairly reliable indicator here, but mostly I just look at the candles. When the break is made, it will most often continue in that same direction, up until the last 30-60 minutes of trading or so (depending partly on the magnitude of the move, partly on how far from the moving averages the stock has moved, and partly on previously established support/resistance), at which point all bets are off. Actually, this occurred with CIEN and EXTR today, though not particularly dramatic examples:
askresearch.com
askresearch.com
Note the MACD signal in both cases, and in the case of EXTR, the stock rapidly broke to previously established resistance at 62, at which point MACD confirmed the weakening, and yielded a sell signal.
As far as the head and shoulders, I don't see that CIEN ever formed one. To me, the key thing to note in the topping pattern (whatever you call it) is that in late October, the stock failed after making a 52 week high, but this failure was not subtle: there was a big gap down ("professional" gap; indicates the big guns heading for the exits rapidly), and this occurred on huge volume, and showed excellent follow-through into the next day. That, IMHO is the exit signal for longs, and the signal to shorts to sit up and take notice. Stocks rarely recover from this type of selling, and a professional gap down from a 52 week high indicates with high probability a stock that is headed from extended bad times, or best case scenario, a selloff and extended sideways movement. This indeed was borne out in subsequent weeks, as the moving averages crossed and reversed their slope, and previous support became resistance as the stock attempted to rally back, but the buying pressure was just not there. It has been downhill since, and IMHO this downhill will continue, since the professional selling is not over, and there are no big hitters stepping up to the plate, and there are not likely to be any. I conclude this, because the total volume on the big selloff days is only a fraction of institutional ownership, about half as I recall.
askresearch.com
So, in order, previous support at 110 became resistance, and CIEN failed at a test there the first week in November. Then, support at the 87-90 region was successfully tested, only to be convincingly breached the last week in November. CIEN now looks poised to approach a retest here, which is now overhead resistance. IMHO, it will fail at this test, and fail convincingly. This might well coincide with earnings, BTW. People will attribute it to earnings if this works out as I think, but IMHO CIEN would fail at this test even if there were no earnings report, because it is clear that there is not sufficient buying pressure to support upside momentum, and there is still a lot of potential downside selling momentum from the big boys; it is only a matter of time there, but they did not get to be big boys by allowing themselves to get stuck holding the bag very long or very often. Rather, they got there by becoming adept at letting others get stuck holding the bag, while they moved on to the next thing.
JMVHO, as always..............
Walkingshadow |
