Cisco Systems, Inc. (CSCO) was favored by Jim Cramer in Monday night's Lightning Round as part of his popular Mad Money program. CSCO has doubled over the past three years but like everything in the security business we focus on "what comes next." Let's look at the charts and indicators of CSCO to see which way they are pointing.
In this daily bar chart of CSCO, below, we can see a pattern of higher lows and higher highs the past twelve months. CSCO, however, has not made a higher high since early October. New highs are not far away but it hasn't happened just yet. Prices are above the flat 50-day moving average line and above the rising 200-day line. The 200-day average line was tested successfully a number of times in October and November. The volume of trading looks like it has been heavier in October and November but the On-Balance-Volume (OBV) line shows a decline in October and November and only a slight rise recently. It would be a more positive picture if the OBV line was leading on the upside. The trend-following Moving Average Convergence Divergence (MACD) recently moved back above the zero line for a buy signal.
In this weekly bar chart of CSCO, below, we get a three-year view. Prices are above the positive 40-week moving average line. The weekly OBV line has been neutral or steady the past two months and the MACD oscillator is close to a new buy signal.
In this Point and Figure chart of CSCO, below, we can see that the program is projecting a small downside price target in the $45-$44 area - not enough to break the longer-term uptrend. A rally to $49.52 would be positive on this chart.
Bottom line strategy: CSCO could frustrate the longs and trade sideways but at some point in the near future another upside attempt at new highs is likely. Existing longs should risk a close below $44.