My system runs three checks before I look at any trade. Trend, Pattern, Squeeze. In that order. The trend check starts with the moving averages. An exponential moving average, or EMA, weights recent prices more heavily than older data. A simple moving average, or SMA, treats every closing price equally over a defined period. On Lumentum's daily chart, price is sitting above the 8-day EMA. The 8-day is above the 20-day EMA. The 20-day is well above the 200-day SMA. That is a fully stacked structure with price on top, which tells me the trend has momentum at every timeframe I check. The same stacked structure holds on the weekly chart. When both daily and weekly confirm, the trend has institutional weight behind it. The pattern is a squeeze forming on the daily chart. A squeeze occurs when Bollinger Bands, which track how far price has strayed from its average, compress inside the Keltner Channels, which measure volatility based on average daily range. When the bands contract inside the channels, momentum is coiling before a release. The trend is confirmed on daily and weekly charts. A squeeze is active on the daily. The Bear Case The stock is up 1,444 percent over the last twelve months. That is a lot of good news already priced in. The bigger problem is the calendar. Earnings hit Tuesday after the close. A loaded squeeze on a runner like this, heading into a binary catalyst with eight consecutive beats already in the rearview, is one of the riskiest setups in the market. Any guidance missed or cautious 1.6T commentary on the call resets the entire narrative. I do not take trades into earnings. Your Action Plan The trade, if there is one, is what happens after Tuesday. Look at what Intel did last week. Earnings came in strong. The stock gapped higher and kept trending up in the sessions after the print. That is institutional conviction showing up after the binary event. That is the move I am watching for on Lumentum. A beat that fades the rip, no trade. A miss takes it off the table. A modest move with no conviction is just noise. If you want to know how I'm moving, which trades I'm taking, you can find out more here. |
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