Cisco Systems Inc. needs to consolidate the recent advance

Aug 20th, 2012 – Comment

At this point I would like to see CSCO build a base of support at $18.50 and the 200-day moving average before committing to a buy.


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Hi Lou,

Is it time to hop on board the Cisco train?
Seems like it’s energized.

Thank you for the excellent reports.
Roger

 

Hey Roger,

Thanks for the assignment and your kind words. This will be the second time that I review the potential for Cisco Systems Inc. (CSCO NASDAQ). On February 18, 2011 Tony wanted to know what was happening to the company as the shares were trading at $18.68. Tony couldn’t understand why a corporation with a strong balance sheet, cash on hand, and good products was not able to get investors to bid the shares higher. It is often that case that fundamentals are not enough to move a stock higher. When I examined the charts it was clear that the shares had given up 35% of their value in just under a year and that they might have to move lower. It was observed that the shares were trading in a down channel and that it might have to retest support at $16.00 if it could not hold support at $18.00. Unfortunately the stock breached $16.00 and found a new low of $13.72 by August of 2011. From there CSCO provided some great trading opportunities but not without risk.

Let’s have another go at the charts and see what might be in the cards for this tech giant.

 

 

 

 

 

 

The three-year chart depicts the downtrend that held sway over CSCO from May of 2010 until October of 2011. The next advance ran until April of 2012 when it hit resistance at $21.00 then pulled back before the big gap up in July of 2012. Currently the shares are overbought and we should expect some resistance to come in at $19.00 and again at $20.00.

 

 

 

 

 

 

The six-month chart illustrates the aggressive advance that took the shares from $15.00 in July to $19.00 by August 17, 2012. The RSI signalled the move off the lows in late July with the MACD confirming the trend in early August. At this point I would like to see CSCO build a base of support at $18.50 and the 200-day moving average before committing to a buy.

The stock has provided some great trading opportunities since August of 2011 but that doesn’t mean a buy, hold, and forget strategy will add profits to your portfolio. If you really like the story then buy in slices so that you average into the opportunity. The next flex point is the release of Q1 for 2013 in November.

Make it a profitable day and happy capitalism!

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