When we last review Cisco Systems Inc. (CSCO) on July 31, we said, "Charts and what they tell us can be bullish or bearish and of course confusing at times. Right now it looks like CSCO is 'rolling over' and it could weaken in the weeks ahead. A close below the recent low at $54 will turn things more negative and that is where the bulls should have their sell stops."
We hope you acted on that advice and got out of harm's way.
Let's see how the charts look now.
In this updated daily bar chart of CSCO, below, we can see the damage on the chart this month. Prices declined and closed below the declining 50-day simple moving average line at the beginning of August and Wednesday prices closed below the rising 200-day average line. The sharp gap to the downside on Thursday shows how much investors want out of long positions.
Some observers may say that CSCO is now in a $49-$44 support area from September to December, but when you read the chart from right to left, that area does not appear first, and so I would not give it much credibility.
The On-Balance-Volume (OBV) is lower than it was on July 31, and the Moving Average Convergence is in a bearish configuration and far from a cover shorts signal.
In this weekly bar chart of CSCO, below, we can imagine that when the chart is updated Friday, we will see a close below the rising 40-week moving average line. The weekly OBV line could make a new low for the move down and the MACD oscillator will probably be lower.
In this Point and Figure chart of CSCO, below, we can see the decline without the price gap. A lower price target of $44.40 is being projected and there was plenty of volume in that area.
Bottom line strategy: It looks like CSCO could continue to act as a bearish drag on the Dow Jones Industrial Average. Continue a defensive posture.
Cisco is a holding in Jim Cramer's Action Alerts PLUS member club.