3 Tech Stocks Surging on Trump's ZTE Tweet

ACIA and LITE stocks are heavily shorted

by Karee Venema

Published on May 14, 2018 at 10:19 AM
Updated on Jun 24, 2020 at 10:16 AM

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.


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