Reflexivity is a concept that explains how the markets can feed off the headlines which can feed off the market action which can feed off the emotions of the masses which can feed off the headlines which can feed off the market action and so on….

I’ve observed, written about and traded against (or is it with) Reflexivity for nearly twenty years now, having read George Soros book about the topic back in college. Anyway, it always amazes me how Reflexivity works over and over and over again. The markets continue to hit all-time highs and the headlines have nothing about economic or debt or geopolitical or earnings crises. When the markets were at lows, the headlines were full of those crises.

Anyway, our recent pick from earlier this week, Ciena, is up some 15% plus this morning after reporting a blowout quarterly report and talking up the year, just as I’d laid out for us in my report on Tuesday. I’ve only just started laying into this stock and I think the analyst estimates are going to have go much higher in coming weeks and months and that this stock is likely to follow those estimates higher. As IBD reported:

For the three months ended Jan. 31, Ciena early Thursday reported adjusted EPS of 12 cents per share, swinging from a 17-cent per-share loss in the year-earlier period. Analysts had estimated a 14-cent loss in fiscal Q1.

Revenue rose 8.6% to $453 million, above estimates of $449 million.

“Our strong first-quarter performance reflects a solid start to our fiscal year,” Ciena CEO Gary Smith said in a statement. “We have positioned Ciena to take advantage of the underlying market dynamics, which are increasingly aligned with our strategy and competitive strengths.”

In fiscal Q2, Ciena said it expects revenue of about $480 million, in line with consensus estimates.

Q1 gross margins of 44.6% were above expectations, UBS analyst Amitabh Passi said in a report.

“While we see potential catalysts for shares in 2013, including a better capital spending environment for next-generation transport and converged packet optical, we require greater conviction that profitability can be sustained,” he wrote.

I love seeing the analysts skepticism in the face of that kind of a blowout and in the face of the cyclical boost to the Internet infrastructure sector that is playing out in front of our eyes. I’m going to add another tranche of CIEN common stock today and will look to add more to it on any future weakness.