Lumentum Holdings Inc. (NASDAQ:LITE) has cleared the ceiling that held the stock in check for nearly five months. Traders now want to know whether the old ceiling becomes the support.
- LITE stock is moving. See the real-time price action here.
Five Months in a Box
The optical-components maker hit an intraday high of $1,085.68 on May 12. Shares then slid to a July 29 low of $594.84 and spent late summer rebuilding.
The breakout came this month. Lumentum shares jumped 7.7% on Oct. 1 alone and closed at a record $1,133.40 on Tuesday. A year earlier the stock closed at $160.60, for a 12-month gain of about 606%, per Benzinga Pro data.
Two Chartists, One Line
Two CNBC contributors flagged the setup in advance. In a Sept. 24 column, Josh Brown of Ritholtz Wealth Management wrote about Lumentum.
“A close above $1,085 opens up new ground on this chart.” He said he would prefer “to enter above $1000 if I’m trading it, and hold for the breakout above the May high.”
Jay Woods, chief market strategist at Freedom Capital Markets, picked up the thread on Tuesday.
“We have a clear breakout from a consolidation area going back to April,” he wrote for CNBC. Woods sees upside to $1,200 and named $1,000 as downside risk, adding that “the old ceiling should become the new floor.”
Watch $1,000
The math cuts both ways. A move to $1,200 is about 5.9% above Tuesday’s close. A pullback to $1,000 would be roughly an 11.8% decline.
Momentum is getting stretched. Woods wrote that the daily relative strength index had just crossed 60. The 14-day RSI is now 66.16, per Benzinga Pro data, nearing the usual overbought line. Woods argued the five-year weekly chart shows “shares of LITE may remain overbought and trend higher for months.”
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Fundamentals Behind the Chart
AI networking demand is driving the rally. Nvidia Corp. (NASDAQ:NVDA) agreed in March to invest $2 billion in Lumentum as part of a broader photonics push,.
Fiscal fourth-quarter revenue rose 109% year over year to $1.01 billion, and management guided the current quarter to $1.23 billion-$1.28 billion. The Street had expected about $1.15 billion.
In an August CNBC interview, Lumentum CEO Michael Hurlston called the demand signal from hyperscalers “incredible."
A hold above $1,000 keeps the breakout intact. A drop back below the May high would suggest buyers ran too far, too fast.
LITE Stock Price Activity: Lumentum stock was down 2.35% at $1106.73 at the time of publication Wednesday, according to Benzinga Pro data.
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