Here’s the long and short term view of Lumentum Holdings (LITE) (March 17, 2017)
Lets look at Lumentum Holdings ( NASDAQ:LITE ) here. This stock is like the most viewed stock in just about any data that you look at. Lumentum Holdings ( NASDAQ:LITE ),optical networking; you can see over the long-term, over the last two years this has been a monster stock. The weekly chart, just kind of more of the same, but it does give you a better sense of how this is trading. Frankly, this weekly chart makes this stock an easier one to understand than this. This just looks really, really choppy, really volatile. Where as, if you zoom out we can look at it this way (I will get into the fundamentals in just a second): It traded here, broke out above this level, stalled a bit, and now it has come back to test that level. So what you do is, for me, you are buying the stock. You can keep a stop below there, if you want to keep a tighter stop and that is fine. But if you are looking at a weekly chart you are not day trading. You are looking at this as a stock that you want to hang on to for a while.
Here is the deal: It’s kind of a rumor or whatever, that Lumentum Holdings ( NASDAQ:LITE ) might get into the consumer electronics business and maybe get some of Tim Cook’s business, some of Apple’s business. This is one of the reasons why you have seen this stock move higher. Institutional buying, whenever you see these spikes, and they are all green, that tells you that there are institutions buying. One thing that you have got to keep in mind about big money coming into a stock, they are not buying it at 40.00 so they can sell it at 50.00. They are buying at 40.00 so they can sell it at 100.00 sometime down the road. My point being, that when you see this kind of volume, that indicates shares that are being taken off the market. Firms that buy this stock, millions and millions of them, they are not trading it. It is effectively out of the float. It is being held, so anybody who wants to buy more stock, and there is 53 million in the float, 2 million traded on Friday, so you can see there is a lot of stock coming out of the market and that gives this much more upside.
So I would look at this as, #1, a volatile stock in the short-term, it definitely is, no question about it. #2, on the long-term chart, definitely trending higher. #3, strong fundamentals, good growth prospects. And so what does that amount to? A good long-term hold. Here is your plan. You buy a little bit here, a little bit. And part of your plan is, that if the stock pulls back then you would be happy to buy more, because this is the chart that you are trading off of. If you don’t, and this is really important, if you don’t have this as a part of your plan then don’t do it. What I mean is, if you are saying, “Well, I am buying this at 49.50 because I think the stock is going to move a lot higher.” That may mean that you are buying more shares than you would if you are buying this and part of your plan is, “You know what? I am going to take a little bit here. But if it pulls back then I am going to be happy to buy more. It is not going to make my position too big, it is going to give me a lower cost basis on shares that I want to own in this time frame.” Because if you stretch this out to the left, squish this down, there is a lot of room for movement here.