In early October we asked the question "Can Cisco break out on the upside?", and now we have the answer. Back in October we said, "A close above $34.50 would be a breakout and tell traders to go long risking below $32.50 and looking for $40-$41 on the upside." (CSCO) closed slightly above $34.50 a couple of times but it did not create the breakout move I was anticipating until prices gaped above $34.50 last week and then closed above $34.50 in a grand display of aggressive buying and a breakaway gap. Let's look deeper at our charts.
In this daily bar chart of CSCO, below, we can see that in the middle of November CSCO was poised to test the rising 50-day moving average line and now it is clearly above it. A bullish golden cross of the 50-day average line and the 200-day line can be seen in the middle of October. The daily On-Balance-Volume (OBV) line has been rising since early July and told us before the breakout that buyers of CSCO were more aggressive. The trend-following Moving Average Convergence Divergence (MACD) oscillator moved above the zero line in early September for a go long buy signal. Another buy signal was flashed last week as the oscillator turned higher again from above the zero line.
In this weekly bar chart of CSCO, below, the upside gap disappears on this time frame. Prices are above the rising 40-week moving average line so we know the longer-term trend is up. The weekly OBV has turned up to a new high telling us that buyers on this time frame have aggressive. The weekly MACD oscillator shows a bullish crossover in September.
In this Point and Figure chart of CSCO, below, we can a breakout trade at $33.93 (look for the "A" on the chart) and a higher price target of $49.30.
Bottom line -- 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.