Sometimes a stock goes up because of something it did. Other times, it goes up because something happened to a neighbor, and investors decide the whole street is suddenly more valuable. Tuesday was very much the latter for Applied Optoelectronics (AAOI).

Shares of the fiber-optic component maker jumped more than 9% as the sector rallied on news that Corning Inc. (GLW) and Verizon Communications Inc. (VZ) had struck a multiyear, multibillion-dollar supply deal covering optical fiber and connectivity products.

The move was notably stronger than the broader market. The Nasdaq edged up 0.06%, the S&P 500 slipped 0.40%, and the technology sector gained 0.44%. Applied Optoelectronics clearly outperformed, riding a wave of renewed investor enthusiasm for companies tied to expanding fiber infrastructure.

The logic is straightforward: when two giants like Corning and Verizon commit to a massive fiber buildout, it signals that demand for optical components is not just alive but thriving. And that's good news for a company like Applied Optoelectronics, which makes the lasers and components that make fiber networks work.

Technical Analysis

But before you get too excited about Tuesday's pop, let's look at the charts. Despite the rally, AAOI is still trading below some key moving averages. The stock sits 5.4% below its 20-day simple moving average of $120.16 and 3% below its 50-day SMA of $117.20.

On the brighter side, shares remain 11.5% above the 200-day SMA of $101.98. That's a good sign for the longer-term trend. The relative strength index (RSI) stands at 48.87, which suggests neutral momentum. Not overbought, not oversold, just kind of hanging out.

For traders, the $117-$120 range could act as near-term resistance. If the stock can break through that, it might have room to run. On the downside, the 200-day SMA near $102 provides a key support level. If that fails, things could get interesting in a bad way.

Analyst Outlook

Wall Street is still pretty bullish on AAOI, even if some recent moves suggest a bit of caution. The stock has a Buy consensus rating and an average price forecast of $205. That's a significant upside from current levels, assuming the analysts are right.

Rosenblatt maintained a Buy rating and a $220 price forecast on Aug. 7. Needham also kept its Buy rating but trimmed its forecast to $190 from $220 on the same day. So, the bulls are still in charge, but they're not all singing the same tune.

ETF Exposure

If you're not a fan of picking individual stocks, you can still get a piece of AAOI through a few ETFs. The stock is held by the Invesco Dorsey Wright Technology Momentum ETF (PTF), the Strive Small-Cap ETF (STXK), and the Golden Eagle Dynamic Hypergrowth ETF (HYP). So, if you're invested in any of those, you're already along for the ride.

Price Action

At the time of publication Tuesday, Applied Optoelectronics shares were up 9.19% at $115.23, according to market data. That's a solid move, but it's worth keeping an eye on whether the stock can sustain this momentum or if it's just a one-day bounce.

As always, do your own research and consider your own risk tolerance. Fiber optics might be the future, but that doesn't mean every stock in the space is a guaranteed winner.