Chart of the Week: Applied Optoelectronics
Hey good morning everybody. Time for our chart of the week for March 11. And this week we’re gonna be focused in on high beta and technology name, Applied Optoelectronics. Symbol AAOI.
Let’s take a look at this chart. It’s really looking strong here.
We see that the stock had been in a nice uptrend from Thanksgiving on. It was about $20 down in Thanksgiving. And it really bolted higher on some good volume, really strong volume, and we have a nice channel that the stock created for those three or four months here. Higher highs, higher lows – textbook definition of an uptrend.
And then when it finally had earnings at the end of February, it bolted out big time. Had a big strong day on very, very heavy volume. And it followed through the following day with even higher volume than the prior days
So what happened here? Some shorts got squeezed. Some buyers stepped in. People who had bought the stock here piled in and bought more.
And we can see that the technicals, the indicators, have all turned really strongly bullish here. Overbought on the relative strength. MACD is overbought. Money flow has been very, very strong.
But what’s interesting here is this: When a stock breaks out like this, you want to see it rise up and then consolidate for something like four to seven days on a little bit lower volume, lower turnover.
So we had a big day here, we had a followthrough day, and we’ll count that as day one. Four to seven days, right? Two, three, four, five, six. Yesterday, on March 9, was the sixth day of this rally. And it had a huge rally attempt on stronger volume too.
This stock has been on fire.
Also, there’s another indicator that we talked about last week with Fastly, which was our chart of the week last week. The stock is more than 100% above the 200 day moving average.
What generally happens is this: The stock loses gravity and it pulls away from those moving averages. So you can see the 200 day moving average is at $31, the stock is at $110. And of course 100% above that 200 day moving average, would be about roughly $63 – from $31.50, $31.75.
So it meets that criteria, and it could continue to take off. It could certainly pull back a little bit, but as far as I’m concerned, it’s carved out a nice right side of the base, and it’s ready to move up and out, probably out to about $145-150 over the next couple of months.
So take a look at AAOI. It’s one of the stronger stocks in the technology area. It’s one of the strongest stocks you’ll see in the stock market, too.
Thanks very much for watching everyone, and I’ll see you guys next time.
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