While I'm not enamored with Nokia (NOK), I am looking beyond Apple (AAPL), Qualcomm (QCOM) or Cisco Systems (CSCO) for something in the communications space where there might be a long trade here.
All paths seems to lead to JDS Uniphase (JDSU) for the short term here, with possible looks at Harris (HRS) and Barracuda Networks (CUDA).
JDSU has done a whole lot of nothing so far this year. The stock is actually down almost 4%. Over the past year, shares are only slightly higher by 2%, even as the broader market turned in a solid 2014. Value trap or potential? The short-term picture looks like potential.
JDSU does have earnings coming at the end of the month, but the chart looks like it is set to run higher into earnings by as much as 5%. Today, we are seeing a breakout from a trading channel formed over the last three weeks. This is fairly significant as this channel formed as a nasty four-day drop for the stock. It has every potential to become a bearish flag, but a close over $13.20 today and tomorrow should nullify the potential bearish setup.
Along with price, we are seeing a turn in momentum and trend as well. The CCI has crossed back above zero here. While this hasn't guaranteed a move higher in the past, it has at least provided us a look at the stock for a few days without much of a drawdown. In other words, if JDSU doesn't pop in the next few days, then a hard stop in the $13.10 to $13.20 range becomes the play. We also have a push of the RSI above 50, which has seen more upside success than the CCI in the recent past, putting a bit more weight in the idea of the long trade here. Lastly, we have a bullish flip in the parabolic stop and reverse, which, when combined with the push over 50 in the RSI, has seen pretty attractive results in terms of risk-reward.
So, on JDSU, we have a clearly-defined price pattern telling us support comes in at $13.20, then again at $12.80 and we have absolutely no reason to be long under $12.80. Furthermore, the CCI identifies the $13.20 area as even more important and hints at a stop above $12.80. Lastly, the bullish positions of the PSAR and RSI indicate the risk-reward setup here favors the bulls with an upside target just under $14.
I do have some interest in Harris here as well. The price pattern on the daily chart has a slightly offset inverse head-and-shoulders pattern with an upside target of $90 on a close over $82. This would be a nice return should it trigger. But the stop here needs to be rather tight. I would use the high from the last strong push of the bulls that came in February. If we do retrace this latest push, you have to consider the last retracement for a target. On the last push, we retraced 61.8% of the move, which, if repeated, would put HRS back to the $74.50 area.
So, I would use the $78.25 closing level as a stop level if getting long Harris. I would wait for the $82 trigger here, especially since we have a CCI dipping back under 100 and an RSI struggling to stay over 70. There's potential here, but right now the risk-reward favors JDSU. But keep a close eye on HRS. There could be more here if we get just a little more push.