Shares of Ciena Corp (CIEN) are among the strongest today as they gain 14%. This comes as the stock is sitting in an intermediate-term oversold condition. Meanwhile, a look to the sentiment profile shows there is room for some skepticism to unwind. To see what I am looking at, let's start with the weekly chart...

Chart Courtesy of Thomson Financial

Two points immediately jump out here. The first is the downtrend that has been in place since the beginning of May. In nearly straight-line fashion, the shares have dropped from 35 to lows near 6. The second point that jumps out is the former support near 25. Now that it has been violated, this former support would be expected to serve as resistance.

In other words, we have a stock that has been beaten up and now has some fairly heavy resistance overhead. However, the picture isn't entirely bleak. After all, the stock would have to more than double from here before it hits that potential road block.

When we turn to the sentiment profile, I see two potentially encouraging signs. The first comes from short interest. Data collected by our Quantified Analysis group shows that 13% of the stock's float is sold short. So far, the shorts have been correct on the stock. However, with the shares now trading in single digit territory, I wonder if they may look to take profits and move on. If so, this could provide some buying pressure.

The second encouraging sign comes from the Street. According to Zacks, only 5 of 15 analysts (33 percent) rank the stock with a "buy" rating. When looking for a bounce candidate what I don't want to see is a situation that is full of analysts who were stuck on the wrong end of a buy rating. That is a concern because they may then be looking to downgrade the stock on rally attempts, which means the stock is continually fighting supply being thrown on the market. In this case, the bulk of the analysts are already out of the stock. I think this lessens the downgrade risk and increases the chance of an upgrade.

With that in mind, let's go back to chart. While we do have an intermediate-term downtrend in place, we also have the weekly Relative Strength Index (RSI) showing an oversold condition. This is the most oversold the stock has been in 3 years. That sets the stage for an initial snapback rally. Longer-term, I think downtrends need to ultimately be resolved by sideways basing periods.