The rally sent the stock to its highest point since early September as Cisco has had a lot of trouble gaining upside traction over the last few months.
Shares were buried in August, falling more than 11% in one day on disappointing earnings. Since then, the stock has been in a nasty downtrend.
However, Cisco gapped up on Monday and even though most of those gains faded by the close it set the tone for a strong week.
The company delivered a top- and bottom-line beat on Thursday after the close, with guidance for both earnings and revenue for next quarter also topping expectations.
Analysts loved the results, giving the stock a nod after the print. Can Cisco keep up the momentum? Let’s look at the chart.
Trading Cisco Stock
The charts certainly aren’t making it easy for bulls. On the plus side, the tone has definitely changed with this one, as the price action becomes more bullish.
That happened after Cisco broke below the September low, but then forcefully reclaim this level near $37.25 and formed a wedge pattern (blue lines) near the 50-day moving average.
It’s bullish to see Friday’s post-earnings reaction, just as it's bullish to see Cisco stock bounce off $40.50, which was the high from October. However, there are some concerns.
My biggest issue is the $41.50 to $42 area. Near $41.50, Cisco has a small gap-fill from the early September breakdown. Given how large the gap is from August, this level seems somewhat irrelevant.
However, the bigger issue is the declining 100-day and 200-day moving averages, which both come into play in this range. $42 was also resistance from August.
Put it all together and it’s not an impossible task for Cisco to continue higher, but it has its work cut out for it.
I would feel better about taking a long position in Cisco stock on a close above $42. That way we could use the post-earnings low at $40.56 as our risk point. On the upside we could target the $43.50 level.
Above that and Cisco stock will begin filling into the gap from August. A full gap-fill would require a rally to $46.84.