When to Buy Volatile Fiber Optic Stocks Ciena, Finisar -- and Get In on the Global Internet Boom

NEW YORK (TheStreet) -- Telecoms have been replacing copper with fiber optics for decades, but the trend isn't played out yet. Here's how you can make a play on optical fibers and participate in the growth of the backbone of the Internet.

Today let's look at the performance and technicals for the two primary companies in this industry. Both are battered: Ciena (CIEN) is down 20% year-to-date, and Finisar (FNSR) is down 23%.

Ciena is a network specialist focusing on expanding its customers' networks while reducing the cost to do so. Its major clients are telecoms, cable operators and government entities.

Finisar provides fiber optic networking monitoring systems that improve the efficiencies of high-speed communications over local area networks and in data storage.

Here's the backstory for Ciena's stock, which traded Wednesday in the $19.07 to $19.41 range. Ciena set a multiyear intraday high at $27.93 on Oct. 22, 2013, then declined to a test of its 200-day simple moving average at $21.66 on Feb. 5. The stock popped to a 2014 intraday high at $27.16 on March 6, as the company reported better-than-expected earnings. This proved to be a selling opportunity, as the stock broke below its 200-day SMA at $23.15 on April 4 and set its 2014 intraday low at $18.00 on May 7. On June 5, Ciena reported better-than-expected earnings once again. This time the stock popped to and failed at its 200-day SMA that day at $22.78.

The stock has been below its 200-day SMA since then. It traded as low as $18.36 on Sept. 4, despite another earnings beat.

The weekly chart is negative, with Ciena's five-week modified moving average at $19.67, but its 200-week SMA provided support at $18.47 on Sept. 4.

Investors should consider buying weakness to annual value levels at $18.34 and $15.05. A monthly pivot is $19.05, with quarterly and semiannual risky levels at $24.02 and $25.23, respectively.

Then let's turn to Finisar, which traded Wednesday in the $18.39 to $18.77 range. The stock began a momentum run when it broke out above its 200-day SMA at $14.00 on June 24, 2013. It traded to a multiyear intraday high at $28.85 on April 24. Finisar missed earnings estimates on March 6, and after a minor hiccup continued the trek to the high. An earnings miss on June 12 was not ignored, and the stock gapped below its 200-day SMA at $23.74 from the close at $25.25 on June 12. The stock traded to an intraday low at $19.10 on June 13.

On Sept. 4, Finisar matched earnings estimates. The stock set its 2014 intraday low at $17.15 on Sept. 9.

The weekly chart is negative but oversold. Its five-week modified moving average is at $19.28, with its 200-week SMA at $19.80.

Investors should consider buying weakness to a semiannual value level at $15.69. There's an annual pivot at $18.91 and monthly and quarterly risky levels at $22.56 and $25.88, respectively.

The insane volatility for these stocks clearly indicate why investors should use good-till-canceled limit orders to buy weakness to a value level and to sell strength to a risky level.

At the time of publication the author held no positions in any of the stocks mentioned.

Follow @Suttmeier

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

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