Dow Jones Futures: Current Stock Market Rally, Ciena Stock Show Fiber

Dow Jones futures rose slightly Sunday night, along with S&P 500 futures and Nasdaq futures. The current stock market rally continues to push through relatively token resistance, with top stocks outperforming. The fiber-optic group has made a comeback. Ciena stock is just below a buy point while Viavi stock and Inphi stock are in buy zones. Fabrinet stock, Finisar stock and Acacia stock are all consolidating near 52-week or all-time highs.


Ciena (CIEN), Viavi (VIAV), Finisar (FNSR) and Acacia Communications (ACIA) are all part of the Telecom-Fiber Optics group, which is ranked No. 19 out of 197 industry groups. Stocks will move with the broader market but also with their industry group or sector, so investors should pay close attention to top stocks in leading groups. Fabrinet stock is in the Electronics-Contract Manufacturing group while Inphi stock is in fabless chipmaker group. But both are seen as optical plays.

Dow Jones Futures Today

Dow Jones futures rose 0.1% vs. fair value. S&P 500 futures climbed 0.1%. Nasdaq 100 futures advanced 0.15%. Remember that Dow futures and other overnight action don’t necessarily translate in actual trading in the next regular session. U.S. stock markets are closed Monday in observance of Presidents Day, but overseas exchanges are active. The Shanghai, Hang Seng and Nikkei indexes were also sharply higher.

President Donald Trump touted “very productive” China trade talks in a weekend tweet after getting an update from his top economic advisers on Saturday. Last week, President Trump, Chinese President Xi Jinping and other U.S. and Chinese officials expressed optimism that China trade deal could be reached.

Current Stock Market Rally

The current stock market rally continues to move higher. The S&P 500 index cleared its 200-day moving average last week, with the Nasdaq composite just clearing that long-term support on Friday. Sure, the major averages have had a few days of pullbacks and sideways action in the current stock market rally. But the Dow Jones and Nasdaq have now logged eight straight weekly gains. Looking at weekly charts for the broader indexes and individual stocks cuts down on the short-term noise.

Meanwhile, top stocks are outperforming in the current stock market rally, with more breaking out, extending runs, or nearing buy points. The Innovator IBD 50 ETF (FFTY) jumped 3.8% last week to a four-month high, while the Dow Jones climbed 3.1%, the S&P 500 index 2.5% and Nasdaq composite 2.4%.

Fiber Optic Stocks

Fiber optic stocks were big winners from late 2014 through July 2017, amid telecom, data center and China. But they then went in a slump. A slowing China economy and U.S.-China trade tensions and sanctions vs. Chinese telecom equipment giants played a role. But they are bouncing back, with Verizon (VZ) and other telecom giants rolling out next-generation networks. Earnings are rebounding.

Ciena Stock

Ciena stock settled just below a buy point in a rare ascending base. The telecom gear maker jumped 6.15% last week to close at 40.21, rising to 40.31 near Friday’s close. Ciena stock showed tremendous strength during the stock market correction.

Shares cleared a flat base on Nov. 5. The relative strength line, which tracks a stock vs. the S&P 500 index, was already at a new high before breakout. While the breakout soon failed in the correction, shares found support at a rising 50-day line while the RS line was soon at record highs.

Ciena gapped out to a new high on Dec. 13 on earnings. While shares quickly retreated, the RS line did not. Ciena stock hit a fresh high on Jan. 9 and kept moving high as the current stock market rally gained strength. Now, with a third and final pullback, Ciena stock has set up the ascending base.

Ciena has been on IBD Leaderboard for several months. It was Friday’s IBD Stock Of The Day.

Ciena earnings growth has accelerated for the past two quarters, with EPS expected to double in the current quarter. Revenue growth has stepped up for three straight quarters.

Viavi Stock

While Ciena stock has been a standout, it’s actually ranked No. 2 in the Fiber-Optic group to Viavi stock. On Friday, Viavi stock soared 4.4% to 12.80, clearing a four-month cup-with-handle buy point of 12.77. The RS line hit a new high a few days before the breakout.

The latest Viavi base formed after a brief breakout from a 15-month consolidation just as the stock market correction took hold. Taking an even longer view, Viavi has been consolidating for almost eight years. One could view Friday’s move as a breakout from that pattern.

Viavi earnings growth has sped up for two quarters, while revenue growth has accelerated for the past four quarters.

Inphi Stock

Inphi stock moved above a 40.94 cup-with-handle entry last week, ending Friday at a 14-month closing high. The RS line is at a 52-week high.

Much like Viavi stock and Ciena stock, Inphi stock had broken out amid the market correction, hitting a 52-week high on Dec. 3, which was a short-term peak for the major averages. After a few quarters of declining profit and sales, Inphi earnings rose 22% and sales 1% in the latest quarter.

Fabrinet Stock

Fabrinet stock cleared a flat base on Nov. 6, in the midst of a correction like Ciena stock, Viavi and Inphi. Shares fell back below the entry but didn’t hit the 7%-8% sell rule and generally found support at the 50-day line. The RS line continued to trend higher. Fabrinet stock cleared another flat base, or base-on-base formation, on Jan. 10. Shares were volatile, hitting a new high on Jan. 25 but tumbling lower on earnings. By Feb. 8, Fabrinet stock was 7.5% below its buy point, triggering the automatic sell rule. Shares have bounced back, and are just 5% off their high. But there is no clear buy point yet.

Acacia Stock

Acacia stock is 5% below a 47.36 consolidation buy point. Coming public in 2016, the Acacia IPO was red hot for a few months, but then slumped for nearly two years. Since last April, shares have trended higher. Acacia stock skyrocketed 38% in the five sessions to Nov. 3, mostly following its latest earnings report, hitting a 52-week high.

Shares pulled back as the correction continued, but the RS line didn’t fall much. As the current stock market rally took hold, Acacia stock stepped up and is building the right side of its base.

In the current quarter, Acacia earnings are expected to rise 30%, ending six quarters of declining profit or outright loss.

Finisar Stock

Finisar stock can view the latest pattern as a flat base from the end of November or a long handle in a cup base going back to December 2017. Either way, the buy point is 23.78 and shares closed Friday at 23.38.

Finisar earnings rose 13% in the latest quarter, partly due to easy comparisons after four quarters of sharp EPS declines. Revenue fell for a fifth straight quarter, but just 2%.


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Originally posted 2019-09-19 23:34:07.


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