Applied Optoelectronics: This Semiconductor Stock Is A Falling Knife In 2018

Successful investors not only catch rising markets or stocks, they also avoid the ones that are falling. In other words, success is not only making profits, but also avoiding losses. One such case is the semiconductor stock of  Applied Optoelectronics which could look compelling to buy as the whole semi space is rising but that may turn out to be an illusion, this is why.

Applied Optoelectronics, Incorporated (Nasdaq: AAOI) is a leading provider of fiber?optic networking products that serves three growing end-markets: Cable Television Broadband (CATV), fiber-to-the-home (FTTH), and internet data centers (Data Center). The company designs and manufactures a range of optical communications products employing vertical integration strategy from laser chips, components, subassemblies and modules to complete turn-key equipment. Its proprietary Molecular Beam Epitaxy (MBE) fabrication process has proven to be reliable over time and highly tolerant of changes in temperature and humidity (delivering millions of hours service), making them well-suited to the CATV and FTTH markets where networking equipment is often installed outdoors.

We saw that semiconductor sector had a wonderful year in 2017. However, the stock price of AAOI is a total failure. Since the third week of July, price of AAOI has fallen for a staggering 70% from the top of 103, and its price is still falling. This article is specially written in response to many requests from readers/investors focusing on fundamental analysis. They are puzzled to the why or some reason for the continual falling price since many of them have been trying to catch the falling knife with no success.

Those who have been following our work since our inception have understood that InvestingHaven’s method does not rely on fundamental analysis of a company to find out whether its stock is worth an investment. We focus on chart analysis, more specifically charting to examine the entire structure of price movement and derive meaningful and actionable conclusions from it.