Option Investor
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Subscriber want to know where to cover

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Late this morning I received an e-mail from a subscriber wanting to know where to look to cover a short in Ciena (NASDAQ:CIEN) that was implemented off the point and figure chart. It pleases me (Jeff Bailey) to actually get e-mail from subscribers that are putting the tool to work. It displeases me that I didn't see this chart a couple of days ago, as shares of CIEN were set up nicely for a short at the $63 level late last week. Today a subscriber shorted the double bottom sell signal at $56 and is now looking for an area to lock in some profits. Here's what I'd be looking for.

Ciena Corporation (CIEN) - $1 box

One area I'd be looking to cover on the current chart is at the $48 or $47 level. The upward trend that I've place on the chart is nothing more that a 45-degree trend that could become the longer-term upward trend developing for the chart in CIEN. If that's the upper trend that institutions have for the stock, that's a place where a trader should be looking to lock in some gains. If shares of CIEN were to find themselves hovering near the $48 range when the NASDAQ-100 bullish percent were to reach the 50% level, I'd also begin lowering my stop in the trade to try and at least have the trade result in a profitable experience. Current bearish price objective with the column of O's building would be $39.

Jeff Bailey

Only the strong survive, but for how long?

The Software Index (GSO.X) had been two of the stronger technology sectors, but today's decline has wiped out anything resembling near-term support.

GSTI Software Index 60-Minute/ Daily Chart

On the 60-minute chart, short-term retracement levels for the Internet Index - gone, 50 and 200-pmas - gone. The support level we are left with is the May low of 210 on the 60-minute chart. Moving to the daily chart we can anchor a new retracement bracket to the April low and the May high to figure what percent of our gains the Software Index is planning to give back. Look where the 38.2% level of our new bracket line up, right at the May low of 210. With the 50-dma still moving up, that gives us three technical points to act as support (May low, 38.2%, and 50-dma). Falling prices and a declining stochastic should set up the battle line at 210.

Adobe Systems Daily Chart

Using the same retracement bracket on Adobe Systems (NASD:ADBE) reveals that not one, not two, but three technical levels could be broken today. The nice up trend, 50-dma, and 38.2% retracement are all in jeopardy if ADBE closes at current levels. Further downside should find support between the previous low at $37.75 and the 50% level at $36.65.

Jeffrey Canavan
Assistant Analyst

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