Two optical stocks are gaining momentum following corrections. Katie Stockton says watch these levels
Optical networking and photonics stocks are showing signs of renewed upside momentum following their short-term corrections. Coherent (COHR) and Corning (GLW) are both testing resistance from their 50-day moving averages, with short-term MACD buy signals increasing the likelihood of breakouts. Improving intermediate-term setups and relative strength suggest the recovery could have staying power, positioning this segment of the AI trade for renewed leadership. COHR is exhibiting improved short-term momentum as it tests its 50-day moving average (MA) after a sharp move higher. The daily stochastics have registered an oversold upturn, and the daily MACD has a bullish crossover. The improvement follows a higher low relative to the July trough, suggesting the recent correction has matured. A decisive breakout above the 50-day MA would support upside follow-through for COHR toward resistance at the top of the daily cloud near $331. Above that level, secondary resistance is approximately $357, defined by a Fibonacci retracement level. Initial support is at the rising 200-day MA, which provides a risk management threshold. Another major player in photonics, GLW has a similar short-term setup, with its latest rally taking it into the 50-day MA near $166. A breakout would put next resistance at the top of the daily cloud near $193 in play, followed by a Fibonacci retracement level near $212. Initial support for GLW is at the 200-day MA near $144. The stock’s recovery from that area helps preserve its bullish long-term structure following the recent pullback. GLW’s weekly chart adds confidence that its recovery can extend beyond a short-term bounce. The weekly stochastics have registered an oversold upturn, increasing the likelihood that the recent low was an important one. Intermediate-term downside momentum is also easing, reflected by consecutive upticks in the weekly MACD histogram. In addition, GLW’s relative chart shows early signs of a return to leadership. The ratio versus the SPX has established a higher low and is turning higher near its rising 40-week MA. Intermediate-term oversold conditions are in place, while the MACD histogram reflects easing downside momentum, supporting a recovery in relative performance. Overall, COHR and GLW look positioned to extend their recoveries, with short-term indicators supporting breakouts above their 50-day MAs. Their 200-day MAs provide risk management thresholds for the stocks as they work toward overhead resistance. —Katie Stockton with Will Tamplin Access research from Fairlead Strategies for free here . DISCLOSURES: None. All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, or its parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. 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