After a big gap down, Cisco is becoming interesting. Let's take a look at what happened last 6 months.
After a strong rally, the stock gapped down strongly in August, a sign that the big uptrend is over. At the 3rd wave bottom, which at the time i thought to be a C from an ABC correction we had a tripple bullish divergence, both on the MACD lines and histogram, indicating that there might be some up movement. There was up movement, till the earnings report dissapointed strongly. After the gap down following the bad Q3 earnings report, the stock stopped declining at the 20 psychological level, where we also had older support levels, forming what looks like a sharp bottom. Last 3 weeks, i can see some bullish activity.
Considering that Cisco was well correlated with the DOW Jones last years, I expect them to synchronize again, shorting the Dow now would be a bad thing to do, so the alternative is going long Cisco.
If we look at the way the stock moves, I mean the lower lows and lower highs, we notice that this high is exceeding the previous one made after there were some bulls buying after the Q3 earnings report.
The MACD has been giving us bullish signals a week ago, all details outlined on the chart.
IF and only IF we have a close over the blue weekly resistance line, I am going long, first two targets outlined on the chart. However, if we close over that level i expect the stock to go even higher than my targets, but it's a long road till there. First let's see 25 bucks per share
Comments
OldGoat
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Thanks for sharing your thoughts on CSCO and KO. I'm long CSCO. Not sure where the top is, but my P&L is positive so will ride it for now.
One thing that concerns me in your analysis on this and KO is the reliance on the DJI. Though I don't expect a blowout to the downside, a correction seems eminent -- probably several in 2014. I am generally short-term and that can account for the different set of glasses. Long term the major indices are likely to be higher a year from now -- though unlikely to be up even half as much as 2013. Agree that I would not short the DJI today.
vlad.adrian
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Your welcome! Regarding the Dow, ofc there will be corrections, but I do not expect it to come now. The reason why I say this is because if you look at the graph of DJIA from May, every time we made a new high it just reversed to the previous low, we had lateral movement, close to a rectangle pattern. Look at what happened now. It made a new high, a stronger one than the previous two, and then corrected to the support from the previos two highs from the lateral movement. This for me shouts strenth. I don't even want to try and predict where we will be in a year from now, it just doesn't matter, cuz just like yourself, I do not keep a position for more than a few months.
Technician
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The earnings miss distorted a previous pretty bullish technical picture, I Agree that CISCO may play catchup
vlad.adrian
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yes exactly, Cisco was very bullish at that point, tripple bullish divergence, how often do u see that?? the fall after the earnings was too big IMO, and I guess that the first reaction was buying cuz many ppl saw it as an opportunity on a bullish stock
One thing that concerns me in your analysis on this and KO is the reliance on the DJI. Though I don't expect a blowout to the downside, a correction seems eminent -- probably several in 2014. I am generally short-term and that can account for the different set of glasses. Long term the major indices are likely to be higher a year from now -- though unlikely to be up even half as much as 2013. Agree that I would not short the DJI today.