Lumentum Holdings Inc (NASDAQ: LITE)

Lumentum Holdings Inc. manufactures and sells optical and photonic products in the Americas, the Asia-Pacific, Europe, the Middle East, and Africa. It operates through two segments, Optical Communications and Commercial Lasers.

Take a look at the 1-year chart of Lumentum (NASDAQ: LITE) below with the added notations:

1-year chart of Lumentum (NASDAQ: LITE)

LITE had been trading somewhat sideways from mid-August to mid-October. During that stretch, the stock created a clear level of resistance at $60 (green). The stock broke above that mark earlier this week and will likely test its highs, at some point.

The Tale of the Tape: LITE has a key level at $60. A trader could enter a long position on a pullback down to that level with a stop placed under it. However, if traders are bearish on the stock, a short trade could be made instead on a break back below $60.

Before making any trading decision, decide which side of the trade you believe gives you the highest probability of success. Do you prefer the short side of the market, long side, or do you want to be in the market at all? If you haven’t thought about it, review the overall indices themselves. For example, take a look at the S&P 500. Is it trending higher or lower? Has it recently broken through a key resistance or support level? Making these decisions ahead of time will help you decide which side of the trade you believe gives you the best opportunities.

No matter what your strategy or when you decide to enter, always remember to use protective stops and you’ll be around for the next trade. Capital preservation is always key!

Good luck!

Christian Tharp, CMT