Cisco Is Vulnerable to Even More Downside

Cisco has more downside ahead, which will lead to low-risk buying opportunities for patient investors.
By Gary Morrow ,

Cisco (CSCO) - Get Report is beginning to look very vulnerable. Today the stock is working on its fifth straight loss as the retreat from last week's high intensifies. In the near term, more downside appears to be ahead and with it a retest of major support. For patient Cisco investors, this will lead to low-risk buying opportunities.

Cisco's powerful run off the Oct. 2 low lifted it over 16% in just over three weeks. This sharp rise pushed shares to its highest overbought reading of the year while recouping all of the major August sell off in the process. As last month came to a close, the stock began to show a lack of momentum. Last Wednesday's close at a fresh post-Aug. 24 high attracted well below-average volume. Cisco has been in a steady drift lower, and today shares are working on an ugly key downside reversal.

For patient bulls, this pullback phase will provide a low-risk buying opportunity. During the powerful October rally, the stock left behind layers of support. In the near term, investors should turn their focus to the $28 area. The stock's 200-day moving average sits here. Just below is the one-third retracement point of October's bull run. A hold in this area will allow Cisco a well-deserved rest while setting the stage for a continued rally.


Click here to see the below chart in a new window. 

Disclosure: This article is commentary by an independent contributor. At the time of publication, the author was long Cisco.

Loading ...