Buying A Beaten-Down Tech Stock

Featuring Dave Floyd

Technical analyst Dave Floyd, founder and president of Aspen Trading Group, is bullish on Applied Optoelectronics (AAOI), which serves as a fiber network supplier for clients that include Facebook and Amazon. Under the right circumstances, Dave believes that shares of AAOI could rise by nearly 70%. He takes to the charts to illustrate his trade. Filmed on June 18, 2018.

Published on
21 June, 2018
Topic
Trading, Technology, Micro
Duration
7 minutes
Asset class
Equities
Rating
14

Comments

  • FH

    Franz-Xaver H.

    24 6 2018 21:21

    0       0

    Dave,

    I agree that it's good to have both the technical and fundamental aspects on your side. So I would feel uneasy to buy a stock with such a huge > 70% short interest. Without knowing the shorts motivation it's just impossible for me to trade it. Holding it for weeks or even months you said.

  • TM

    Troy M.

    23 6 2018 04:45

    0       0

    Dave,

    This stock is up 19% already from where I bought it after first reading and agreeing with your analysis in Q2 Killer Charts. Thanks! Do you frequently use trailing stops, and if so, how do you determine where to place them? Also, where does Elliot wave fall in the range of somewhat reliable indicators?

    Have a great weekend.

    Troy

    • DF

      Dave F.

      24 6 2018 16:37

      1       0

      Troy - you are welcome....nice run to be sure. I think the current pull-back off the June 4th high offers up an opportunity to add to/establish longs.

      Trailing stops? Yes, I do use them for sure. I nearly always place them at technically relevant price levels (from an Elliott Wave and Fibonacci perspective). Too often traders choose arbitrary and technically irrelevant levels....typically based on locking in some sort of anchored monetary gain.

    • TM

      Troy M.

      25 6 2018 02:57

      0       0

      Great, thanks a lot Dave!

  • ss

    sid s.

    22 6 2018 01:11

    2       0

    love this guy.

  • PC

    Peter C.

    21 6 2018 19:40

    1       0

    Does anyone know what the narrative is for the shorts?

  • KS

    Kathleen S.

    21 6 2018 18:23

    6       6

    The markets are fake -- they move based on what a central bank says. How can anyone trade these markets when they are not real, it is all luck and a narrative. And the narrative is controlled -- there is nothing organic or real about these fake markets-- for example when the Swiss Central Bank can print money out of thin air and buy FaceBook or Amazon stock we have left reality and I refuse to place bets in a rigged game. Good Luck to everyone else.

    • DF

      Dave F.

      21 6 2018 21:31

      5       0

      Hi Kathleen - there is certainly an element of truth to your comment. The Central Banks will likely be proven to be a bunch of misguided academics with hardly any real world perspective. So yes, they do control the narrative to some degree....and I, like you find it rather disgusting that we do not have a true free market where price discovery reigns supreme.

      However, that does not mean you cannot trade the markets and generate returns. In some way, you have to be pragmatic and simply allow for that flimsy narrative they espouse to get at your back and simply be nimble. As I always say to my clients, I am a tactical bull in here. Just my 2 cents.

    • BK

      Brian K.

      22 6 2018 14:58

      3       0

      If they are faked and being bid up, why not just purchase SPY and ride the bubble, historically beats cash every year except during depressions.

    • NI

      Nate I.

      24 6 2018 04:33

      0       0

      CB's have pushed valuations up with financial repression, but I believe the passive complex (ETFs, index funds, etc) has been a far bigger factor in putting a bid under market darlings. The passive complex has also eviscerated owner stewardship (not much press on that, but I think it's the most significant factor in business dysfunction since the legislative acts related to corporations of the late 1800's). It's certain to end very badly. When owners are absent and businesses are nothing but numbers on playing surface with probabilities linked to actions of the other players, that's called a casino. History demonstrates there will be a clearing event. There always is. Now is a good time to play defense.

    • DF

      Dave F.

      24 6 2018 16:38

      0       0

      Nate I - I like and appreciate your comments and insight. That to me is indeed an issue....but for now, nobody really seems to care.

    • DF

      Dave F.

      24 6 2018 16:39

      0       0

      Brian K.....my sentiment to some degree as well. Be nimble and don't get too complacent....

  • CT

    Christopher T.

    21 6 2018 12:23

    3       0

    good trade

    • DF

      Dave F.

      21 6 2018 13:27

      3       0

      Thanks, Chris....time will tell.... I am still patiently watching...but early AM action is encouraging.