Cisco Systems (CSCO) gapped lower today, breaking nearby support to make a new low for the move down. We looked at CSCO back in the middle of August and concluded that "It looks like CSCO could continue to act as a bearish drag on the Dow Jones Industrial Average. Continue a defensive posture."
In this updated daily bar chart of CSCO, below, we can see how prices were holding the $46 area (support) in August and October but that support should now turn into resistance as anyone long from $46 will try to use a bounce back to that level to sell.
CSCO is below the cresting 200-day moving average line and the cresting 50-day moving average line.
The daily On-Balance-Volume (OBV) line moved up from early October so we can assume that there are some recent longs who woke up today to find their positions under water and they should be anxious sellers today.
The Moving Average Convergence Divergence (MACD) should quickly turn lower to a fresh sell signal.
In this weekly bar chart of CSCO, below, we can see that prices have been below the cresting 40-week moving average line for several months.
The weekly OBV line shows a peak back in April and the MACD oscillator is well below the zero line in sell territory.
The MACD oscillator was narrowing in recent weeks as prices moved sideways but that should change quickly. $40 is the next probable support area.
In this Point and Figure chart of CSCO, below, we can see a downside price target in the $41 area.
Bottom line strategy: Stand aside from the long side of CSCO as prices are likely to retest the December low in the weeks ahead.
(Cisco Systems is a holding in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells CSCO? Learn more now.)
