Ciena Stock Has Room to Run

There's still plenty of pent-up pessimism ready to be unwound, too

Apr 29, 2020 at 1:49 PM
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Network operator Ciena Corporation (NYSE:CIEN) has seen some impressive price action on the charts of late. After breaking back above a long-term trendline, the shares are forming a bull flag pattern around $46, which is three times its 2016 lows. After being turned away from here on its first few attempts, there's support in place for CIEN to make another run at this level. Plus, a confluence of upwardly sloping moving averages, including the equity’s 20-day trendline, could swoop in as additional support.

WKALT CIEN Chart Apr 24

Despite CIEN’s proven ability to weather the broader market’s recently volatile nature, there is still plenty of pent-up pessimism surrounding the stock. The equity’s Schaeffer’s put/call open interest ratio (SOIR) of 1.09 sits higher than 72% of all readings from the past 12 months. What’s more, this ratio is rolling over from a high point of 1.79 – a move that’s predated rallies in the past.

Meanwhile, there is peak open interest at the 41-strike put, which could put some wind at the security’s back now that it’s broken back above this region, with call strikes acting as a magnet from above.

Now is a perfect time to speculate on Ciena’s next move with options. The stock’s Schaeffer’s Volatility Index (SVI) of 44% is higher than just 19% of readings from the past year. This means options players are pricing in relatively low volatility expectations for CIEN right now. Finally, our recommended call has a leverage ratio of 5.1 and will double on a 20.9% pop in the underlying stock.

Subscribers to Schaeffer's Weekend Trader options recommendation service received this CIEN commentary on Sunday night, along with a detailed options trade recommendation -- including complete entry and exit parameters. Learn more about why Weekend Trader is one of our most popular options trading services.


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