Acacia Communications, Inc. (NASDAQ: ACIA)

Acacia Communications, Inc. develops, manufactures, and sells high-speed coherent optical interconnect products in the Americas, Europe, the Middle East, Africa, and the Asia Pacific region.

Take a look at the 1-year chart of Acia (Nasdaq: ACIA) with the added notations:

1-year chart of Acia (Nasdaq: ACIA)

After hitting its 52-week high a few weeks ago, ACIA appears to have fallen into a flag pattern. The pattern gets its name from the appearance of a “flagpole” created during the steep, early November rally, and then the formation of the small pennant formation since (green). This type of price action usually implies a break higher, but is certainly not a guarantee.

The Tale of the Tape: ACIA is consolidating within a flag pattern. A break above $47 area should lead to much higher prices, thus a long trade could be made. However, a break below the $42 area should lead to lower prices and a short opportunity.

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