Tellabs (TLAB)

Company

"Tellabs advances telecommunications networks to meet the evolving needs of users. Broadband solutions from Tellabs enable service providers to deliver high-quality voice, video and data services over wireline and wireless networks around the world. Ranked among the BusinessWeek InfoTech 100, Tellabs is part of the NASDAQ-100 Index, NASDAQ Global Select Market and the S&P 500." (company website)

TLAB 1-year chart
TLAB 1-year chart

Sell short

TLAB 2-month chart TLAB 2-month chart

The market contortions at the end of February drove TLAB down through the upward trend line, and it appears to have fallen out of a nascent triangle formation. The 50-day moving average is falling in a pretty straight line.

  • Price momentum (PPO) — gradually weakening (lower highs)
  • Trend (ADX) — strengthening, with selling pressure (-DI) above buying pressure (+DI) and rising
  • Relative strength (RSI) — weakening gradually
  • Volume — declining over past two months

Based on technical analysis, MarketEdge calls TLAB a "short candidate" in a "weak downward trend."

Buy to cover

loss Bottom line
-6%

I saw a stock in distress. Others apparently saw a bargain. Immediately after I shorted TLAB, there were five consecutive up-days on average or above volume. It blew through the short-term trendline, and has now recovered to the 50-day moving average. There might even be enough momentum to carry it through the 200-day moving average. Earnings next week will doubtless determine which direction TLAB will go from here.