Acacia Communications, Inc. (NASDAQ:ACIA) in a Topping Pattern


Acacia Communications, Inc. (NASDAQ:ACIA) closed Wednesday at $103.47, down 1.36% after trading 1.8 million shares.

The IPO darling has given solid returns to its investors, but is looking to ramp up growth further. It accordingly announced a secondary stock offering worth $450 million on Wednesday.

Acacia itself is offering $125 million and the rest is being offered by selling shareholders.

Acacia Communications, Inc. (NASDAQ:ACIA) cites high growth in filing

“We have experienced rapid revenue growth over the last several years,” says Acacia in its filing. However, the share price reacted negatively, dropping by over 10% on the day of the announcement.

Well, the share price too has done extremely well, so far, gaining 256% from its first-day-of-trading open price in May.

Can the torrid growth continue?

Acacia Communications, Inc. (NASDAQ:ACIA): Preliminary Q3 numbers

For Q3, Acacia expects revenue of $127M-$131M, net income of $29M-$33M and EPS of $0.72-$0.81.

Though good, these numbers are a far cry from those in Q2, which showed a quarterly sequential top line growth of 38% – this quarter is only 11%.

The above data should be considered along with the technical picture presented by the Acacia price chart.

The daily chart shows that Acacia has carved out a topping pattern known as the Head-and-Shoulders reversal pattern.

The head-and-shoulders reversal pattern is a very reliable indicator of a top being formed in the stock.

The left shoulder formed at $124.90 on August 18, the Head at $128.73 on September 7, and the right shoulder at $121.86 on September 23.

The price has now closed below the neckline of the pattern, and a fall from these levels can be quite sharp and extensive.

Investors should therefore be extremely cautious when trading this stock.


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