3 Tech Stocks Surging on Trump's ZTE Tweet

ACIA and LITE stocks are heavily shorted

May 14, 2018 at 10:19 AM
facebook twitter linkedin

Optical component stocks are rallying today, after President Donald Trump signaled support for embattled Shenzhen-based tech firm ZTE. Trump tweeted that he and Chinese President Xi Jinping are "working together to give massive Chinese phone company, ZTE, a way to get back into business, fast." In mid-April, the Commerce Department initiated a seven-year ban for U.S. companies selling to the telecom company, causing ZTE to suspend part of its operations.Among those making big moves higher are Acacia Communications, Inc. (NASDAQ:ACIA), Lumentum Holdings Inc (NASDAQ:LITE), and Oclaro Inc (NASDAQ:OCLR).

Acacia Communications Shorts Dodge a Bullet

Acacia Communications gets about 30% of its revenue from ZTE, and today the shares have shot up 11.4% to trade at $35.08. While the stock still has yet to close its April 13 bear gap -- which sent the shares to a record low of $24.72, and would take a breakout above the round $40 mark to fill -- they are trading above $34-$35 range, which had served as a floor from mid-November through early April.

A handful of short sellers cashed out during the stock's recent technical troubles, too. Short interest on ACIA fell 7.1% from the April 15 to the May 1 reporting periods, and is now docked at 5.98 million shares. However, this still accounts for almost 25% of the stock's available float.

Lumentum Stock Squeezes Shorts

ZTE sales reportedly account for roughly 5%-10% of Lumentum revenue, and the stock is trading 3.8% higher at $65.50 after Trump's tweet. After skimming the round $50 mark in late April, the shares gapped higher on a positive earnings reaction, and are now trading above recent congestion in the $64 area.

LITE is maintaining a nearly 33% year-to-date lead, and shorts may be feeling the pressure. The 10.95 million Lumentum shares sold short represent 18.3% of the stock's available float, or 4 times the average daily pace of trading. A continued surge could shake some of the weaker bearish hands loose, creating even bigger tailwinds for the security.

Oclaro Stock Rallies Into Key Technical Level

Oclaro stock is up 6% to trade at $9.08, but is running out of steam near $9.30 -- home to its pre-bear gap levels from mid-April. The company brings in almost 20% revenue from sales to ZTE, and is currently being bought out by Lumentum in a cash-and-stock deal valued at $1.8 billion, or $9.99 per OCLR share.


Now is the time to join our thriving community of Event Traders who consistently profit from every earnings season. With this discounted subscription opportunity, you'll stay ahead of the curve and seize opportunities others miss. Do not let Q3 earnings season pass you by – subscribe now and supercharge your portfolio with expert insights that turn market reactions into profit-generating opportunities!! Don't waste another second... join us right now before the next trade targeting +200% is released!