Third Time's the Charm for Cisco, Trade From the Long Side

 | Apr 16, 2018 | 10:04 AM EDT
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Cisco Systems, Inc. (CSCO) was last reviewed back in November where I recommended, "stay long CSCO. Raise sell stop protection to a close below $35. My price targets for CSCO go up by fives -- $40, $45 and then $50." With the benefit of a few months of hindsight we can see that CSCO reached our $40 and the $45 price targets.

Like the broad averages, CSCO corrected lower in February but rallied to new highs into March. Prices have retraced some of that advance and may now be poised for new highs. Let's check out the charts again.

In this daily bar chart of CSCO, below, we can see that prices have rallied back above the flat 50-day moving average line. The slower-to-react 200-day moving average line is still rising and comfortably below the current level of trading.

The daily On-Balance-Volume (OBV) line is particularly strong - it rose nicely from June to January and hardly dipped in early February when prices corrected. It looks like buyers just retreated a little. The OBV line rose to new highs in late February along with the price action. The correction in March also shows little reaction with regard to the OBV line.

The trend-following Moving Average Convergence Divergence (MACD) oscillator was weakening from late January but it has turned up recently to a cover shorts buy signal. Moving back above the zero line would be an outright go long signal.

In this weekly bar chart of CSCO, below, we can see that prices have more than doubled over the past two years with prices above the rising 40-week moving average line for most of that time. The weekly OBV line was strong in late 2017 and has been steady the past three months.

The weekly MACD oscillator just crossed to the downside for a take profits sell signal.

In this Point and Figure chart of CSCO, below, we can see an upside price target of $48.77.

Bottom line: While CSCO has made two downside corrections since the beginning of 2018, it looks capable of setting new highs in the near-term. If you can afford to risk below $40, trade from the long side looking for a rally to the $48.77 to $50 area.

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