A recent market analysis highlights two key trading opportunities for Tuesday: Lumentum (LITE), a photonics stock already up 600% this year, is experiencing a strong breakout with potential to reach $1,200. Conversely, PepsiCo (PEP), currently at 52-week lows and in a clear downtrend, shows technical signs of being oversold and ripe for a tradeable relief rally, with upside targets between $129 and $138.
In a compelling Tuesday trading outlook, investors are being pointed towards two distinct opportunities: one riding a powerful upward wave and another poised for a significant rebound. Jay Woods, Chief Market Strategist at Freedom Capital Markets, breaks down the technicals in detail (as seen in his accompanying video chart breakdown).
Lumentum (LITE): A Photonics Powerhouse Breaking Higher
First on the radar is Lumentum Holdings (LITE), the photonics stock that has already delivered a staggering 600% return over the past 52 weeks. Far from resting on its laurels, LITE is now kicking into another upward gear, exhibiting a clear breakout from a consolidation zone that has held since April. The technical picture suggests rapid upside potential, with initial targets set at $1,200.
From a risk management perspective, the previous resistance level of $1,000 is expected to transform into a robust new floor, offering a protective downside buffer. Examining the daily chart, the Relative Strength Index (RSI) has just climbed above 60, indicating strong momentum without yet reaching traditionally overbought levels above 70. Historically, as evidenced by a five-year weekly chart analysis, shares of LITE have demonstrated a propensity to remain overbought and continue their ascent for extended periods, sometimes for months. With recent sector strength returning and Lumentum's compelling momentum, it appears a new, significant leg higher in its uptrend is just beginning.
PepsiCo (PEP): Is the Fizz Returning for a Tradeable Bounce?
On the flip side, we turn our attention to a consumer staple giant that has seemingly lost its sparkle: PepsiCo (PEP). The beverage and snack titan is currently languishing at 52-week lows, having shed 12.6% year-to-date and sitting a substantial 37% below its all-time highs from 2023. While the chart clearly illustrates a well-defined downtrend, PEP is now reaching a critical juncture—it's oversold and signaling a setup for a tradeable bounce.
While attempting to "pick bottoms" can often prove to be a costly endeavor, the current technical indicators suggest a potential for a short-term pop and a solid mean reversion within its broader downtrend. Daily charts reveal an extreme overextension, with shares trading at the very lower bounds of their downward channel. Momentum indicators are firmly in oversold territory, a condition that has historically led to either stabilization or sharp snapback rallies for the stock.
A rally back to the $129 level would bring shares to recent and former support levels observed on weekly charts. Should PEP manage to eclipse this mark, further upside targets ranging from $135 to $138 become probable. The monthly chart, while painting a picture of a major trend change, also shows stochastics in a rare oversold state on this longer-term timeframe. Previous occurrences of such deep oversold conditions have often coincided with pivot points, as exemplified by a relief rally in May 2025 that yielded over 20% returns for investors, even amidst a prevailing downtrend. With earnings approaching on Thursday afternoon, and considering that shares have rallied after four of the last five results, the strategy here is to play for a relief rally that could deliver a 10% to 20% gain over the coming weeks. While it's premature to call this the start of a longer-term turnaround—as not all beaten-down stocks, like Nike, manage to sustain a bounce—the current risk-reward profile heading into earnings appears favorable.
Jay Woods is the Chief Market Strategist at Freedom Capital Markets.
DISCLOSURES: 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. THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL'S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR.
