The Long Side on Finisar (FNSR)

 

Finisar Corp. (NASDAQ:FNSR) is a provider of so called ‘optical subsystems’ and equipment that connects local area networks, storage area networks and metropolitan area networks. 

Sector: Communications

Industry: Telecommunications

On the weekly chart we note two key trend lines.  The first is the uptrend from the lows of 2009, which Finisar Corp. (NASDAQ:FNSR) broke through in early June and is now re-testing from underneath.  The second important area is the support line near $12, which again successfully proved itself during the selloff in early August.    

 

With those two trend lines from the weekly chart in mind let’s now look at the daily chart.  The medium-term trend is lower as displayed by the down-trend line, i.e. the series of lower highs and lower lows.  However, note that last Friday September 2 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 towards the longer-term support zone near $12.

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