Lumentum (LITE) is close to breaking out. Here’s your trade! (March 22, 2017)
LITE
I want to look at Lumentum ( NASDAQ:LITE ) here. This is a company, they are in the cloud industry, optical stuff. Here is the deal: There is consensus or conjecture, whatever, that they may be able to get in on some of Apple’s ( NASDAQ:AAPL ) business. The thing is, the price target was recently raised by a firm, today actually, for $57.00. It doesn’t seem like a big deal, it is just right up here. But here is what you have got to keep in mind: An uptrend, trading sideways, and then a breakout, and then this little pullback here. So if this stock hits the $57.00 level that will really be a breakout.
Analysts don’t get to truly decide when a stock peaks out. A lot of analysts just stay wrong until they are completely wrong and then they reverse themselves and then they are wrong all over again. But when a stock gets up to a price level you are going to do one of two things: If you are the analyst or the person that is listening to the analyst you are going to sell. Or you can say, “You know what?” And I do this with my stuff, “I had my measured move. I had my idea of how far this stock was going to go, but it is up here now, and you know what? I think it could go to 60.00.” Or, “Maybe the fundamentals are better.” Or, “Maybe I had a bad pizza last time and today I am on my veggie diet so I feel a lot better, a lot lighter, so maybe I am going to raise my price target to $70.00.” The bottom line is, there are a lot of things that can happen when a stock breaks out and when somebody raises their price target.
Here, this is what I am looking at, a couple things. I am looking at a nice clean break off the 50-day moving average, so to me that is support right there. Here, this is resistance, right here. It is kind of a low probability trade if you are buying are buying the stock right here. If you are not long already, in my view you kind of want to wait for it to hit a new high. Simply because, if it hits a new high that tells you that this stock is breaking out of this box. As long as it is still in this box then obviously it is not out of the box, so that is your ceiling right up there.
I want you to keep an eye on this stock. If it happens to pull back closer to the 50-day moving average I think it is a good buying opportunity. Or, the high here was 53.70, lets say 53.80 (setting an alert). So if this stock hits a new high, we will put this in for a month, so if this stock breaks out above this level I am going to hear about it on my Worden software, TC2000. If that hits then I will be in. And then I can do it another way and say, “You know what? If the stock hits 45.00 I want to know about that too, because I might want to buy it on the downside.” So you bracket a stock like this, that is trading in a range; you want to buy it, you are just waiting to see, “Okay, am I going to buy it on the pullback or am I going to buy it on the next breakout?” But one way or another you are only going to take action on this stock if it actually hits a buy point at the bottom of the box or it breaks out the top.
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