Ubiquiti Networks Inc. (UBNT) was a member requested update the other day. Is now a good time to invest or is it better to wait? That was the question I was asked about this stock.

Straight from Ubiquiti Networks Inc. (UBNT) webpage:

Ubiquiti Networks® develops high-performance networking technology for service providers and enterprises. Our technology platforms focus on delivering highly advanced and easily deployable solutions that appeal to a global customer base in underserved and underpenetrated markets.  Our differentiated business model has enabled us to break down traditional barriers such as high product and network deployment costs and offer solutions with disruptive price-performance characteristics. This differentiated business model, combined with our innovative proprietary technologies, has resulted in an attractive alternative to traditional high-touch, high-cost providers, allowing us to advance the market adoption of our platforms for ubiquitous connectivity.

Now that we have a basic knowledge of the company and its networking technology, let’s review some charts!

Ubiquiti Networks Inc. (UBNT)

This is a 1 year daily candlestick chart for Ubiquiti Networks Inc. (UBNT). Rather than my usual 20 year chart to start off the article, I wanted to focus short-term based on the question posed.

After an earnings miss, UBNT had a Falling Window candlestick pattern develop. This is an area of stiff resistance that is usually not penetrated on its first attempt. Facebook took 2 attempts to break back above its Falling Window resistance area from 2 earning reports ago.

Ubiquiti Networks Inc. (UBNT) does look like a reversal is imminent. It formed a Hammer candlestick pattern right at the end of a Bearish Impulse wave pattern. This indicates to me the bounce is ready.

Analyzing Support and Resistance Areas for Ubiquiti Networks Inc. (UBNT)

In order to set some expectations for UBNT’s share price, I would recommend pulling up a 6 month daily candlestick chart for[s2If !current_user_can(access_s2member_level1)]….

If you want to continue reading this article for Ubiquiti Networks Inc. (UBNT), you must first login. I review a trading opportunity that is currently presenting itself, including the buy-in price target and sell target for the short-term. I also discuss items to monitor during its attempted recovery over the next couple of weeks.

If you are not a Trendy Stock Charts member, consider joining today! There are several different subscription plans available.[/s2If][s2If current_user_can(access_s2member_level1)]Facebook (FB) and analyze its price activity after it developed its initial downtrend like UBNT has.

UBNT’s MACD Histogram on its daily chart above is reflecting decreasing selling momentum, a positive sign of price stabilization. The next positive sign is the Hammer candlestick pattern that developed right above a support area from a Rising Window candlestick pattern. The Hammer candlestick developed on volume that was greater than the preceding candlestick’s total volume, making a reversal more probable.

Based on the above chart, a case could be made to purchase some shares tomorrow with a scale-in purchase. Make sure to confirm the probable reversal by waiting for its share price to break above the high from the Hammer candlestick. If UBNT’s share price breaks below the bottom of Hammer candlestick’s lower shadow, refrain from making that purchase as there may be a little more selling pressure ahead still. I anticipate a break above based on the Bearish Impulse

UBNT – Is “The Pyramid” Next?

In my update for Valeant Pharmaceuticals (VRX) yesterday, I discussed a chart pattern that I named “The Pyramid”. This chart pattern tends to develop immediately after a Bearish Impulse wave pattern completes its development.

Assuming that UBNT’s share price breaks above the Hammer candlestick pattern today and not below it, it share price should push its way back up towards the Falling Window candlestick pattern’s resistance area.

But as I have mentioned before, and I will repeat it again for some of the newer members, when a Bearish Impulse wave pattern starts a new downtrend, the downtrend is not over when the Bearish Impulse wave pattern completes. That is only Wave A. Waves B & C of the correction still need to develop. Refer to the Completed 8 Wave Elliott Wave Cycle for one possible outcome of what Waves B & C could look like.

I placed a Fibonacci Retracement Tool on the current downtrend. Both uptrends and downtrends correct, so the Fibonacci Retracement Tool can be used in both cases.

Using a Fibonacci Retracement Tool on UBNT’s current Downtrend to Calculate the Minimum 38.2% Retracement of the Bearish Impulse Wave Pattern

While UBNT’s share price could push all the way to the bottom of the Falling Window candlestick pattern’s resistance area on this anticipated bounce, I like to start conservative with the upside price targets. The 38.2% Target Line usually represents the minimum amount of a retracement for a stock’s share price.

Because of the consequences of a Zig-Zag wave pattern, if any shares are purchased today they should be disposed of near the targets mentioned above.

UBNT – Elliott Wave & Fibonacci Analysis

This 1 year chart analyzes UBNT’s uptrend and current correction from an Elliott Wave and Fibonacci perspective. The lower shadow from Hammer candlestick pattern that developed yesterday reached the 50% Retracement Line from the Fibonacci Retracement Tool. This Fibonacci Retracement Tool was placed on UBNT’s complete uptrend That seems like a great stopping point for Wave A in the current correction.

Using Elliott Waves and a Fibonacci Retracement Tool to Calculate Support Areas for Ubiquiti Networks Inc. (UBNT) Pullback

With the Rising Window candlestick’s support area right below the 50% Retracement Line, I would anticipate that any break below the 50% Retracement Line is for only a short period of time. But the endpoint for Wave C is something that can be calculated at a later date, after the anticipated bounce completes and UBNT’s share price starts to correct again.

Ubiquiti Networks Inc. (UBNT) – Summary

Ubiquiti Networks Inc. (UBNT) appears to be offering an opportunity to make a scale-in purchase of shares tomorrow for anyone wanting to initiate a position in the company. However, do be aware that UBNT’s correction is not yet over.

Whether UBNT goes on to form a Pyramid chart pattern or a Zig-Zag wave pattern can not yet be determined at this point. Purchasing shares based on the reversal signals flashing could provide a 10-15% trade opportunity to the upside, but it is imperative to take profits once any bearish reversal signs are seen during the bounce. This could be at the 38.2% Target Line, or the $54,23 area) or slightly higher, possibly up to the bottom of the Falling Window candlestick pattern’s resistance area.

UBNT is in the process of correcting its entire Bullish Impulse wave pattern (Waves 1-5) that took almost a year to complete. The entire correction is not over with the current pullback. But with the trading plan laid out above.

Good luck trading!!