CIEN Watch

Communications technology company Ciena Corp. (CIEN) is showing a bear-phase parabolic sar on the fourth day of a sharp decline.

Person's Proprietary Signal switched into bear phase yesterday.

	trend	adx	psar	pps	macd	macd trend	sto	sto trend
CIEN $17.06

I find the signal to be interesting because of what it says about judging trends.

Looking at the three-month daily chart, CIEN has been in an uptrend from the get-go. By that interpretation, the current pullback, unbuttressed by news, is a counter-trend move and so not tradable under my rules.

However, the recent, unrelenting downward move has covered -12.5% from the April 15 high to today's low (so far). In my book, that counts as a downtrend, and the counter-trend objection would no longer be valid.

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The other signalers that I follow -- the macd and the stochastic -- are also rapidly deteriorating in the bearish direction.

The average direction index is 27, considered marginal. But that's no help in this case, if a new trend has indeed been established. The adx covered 14 trading days, and this trend is a newborn, only four days old.

The real question to ask, I think, is how much downside remains. I mean, 12.5% is a lot of distance, and it's normal for stocks to either pause or even rise a bit after such a fall.

So let's look at the reversal levels.

You are here:

• Reversal
• $18.75, +9.9%
• Now $17.06
• Reversal
• $15.80, -7.4%
• $14.96, -12.3%
• $14.39, -15.7%
• $14.30, -16.2%

CIEN still has a ways to go before it starts to hit resistance to the downside. After that, the levels get fairly narrow, and it'll be tough going.

One aea of concern is that the low today was a sharp bounce off of the 20-day moving average. The continued downtrend would be more convicing if the ma20 were to be pierced.

This signal will be followed in the daily Watchlist, which is posted beginning around 2:45 p.m. Eastern. Look for it at www.timbovee.com.

Abbreviations:
psar - Parabolic Stop and Reverse
adx - Average Directional Index
pps - Person's Proprietary Signal
ma20 - 20-day moving average
macd - Moving Average Convergence-Divergence
mfi - Money Flow Index
sto - Fast Stochastic

About the glance: The colors indicate the state of each signal.

• trend: Determined by the 5-day moving average, green for up, red for down, yellow for sideways
• adx: orange for above 30-up, blue for 20-down, purple for in the middle. Red is most prone to whipsaws
• psar, pps, macd: green for bull mode, red for bear
• sto: green for overbought, red for oversold, yellow for the neutral zone.

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