Serge Berger is the head trader and investment strategist for The Steady Trader. Sign up for his free weekly newsletter.
Finisar Corp. (NASDAQ:FNSR) – This company is a provider of so-called “optical subsystems” and equipment that connects local area networks, storage area networks and metropolitan area networks.
On the weekly chart, we note two key trendlines. The first is the uptrend from the lows of 2009, which Finisar broke through in early June, and is now retesting from below. The second important area is the support line near $12, which again successfully proved itself during the sell-off in early August.
With those two trendlines from the weekly chart in mind, let’s now look at the daily chart. The medium-term trend is lower as displayed by the downtrend line, i.e., the series of lower highs and lower lows. However, note that on Friday, the stock broke the downtrend line to the upside and found resistance at the uptrend line, which I pointed out on the weekly chart.
Given the confluence of technical levels here and the broader market downtrend, a potential trade in this stock is best taken in steps. Here is what I have in mind: On a solid daily close above $21, a long setup may become reasonable. Stops could then be set just below the downtrend line with a first profit target near the 200-day simple moving average (blue line), a second profit target around the lower gray bubble ($28 area), and depending on one’s time frame, a third profit target could be set around $38 (upper gray bubble).
However, should last Friday’s break above the downtrend line end up being a fake-out, it would certainly be plausible that the stock moves back toward the longer-term support zone near $12.
- See Sam Collins’ Daily Market Outlook: Death Crosses Flashed; Bear Market Confirmed
- See Serge Berger’s Daily Market Outlook: Why the Sell-off May Not be Very Meaningful
- See Sam Collins’ Trade of the Day: A Defense Stocks Only Dividend Investors Should Love
