Shares of Cisco Systems (CSCO - Get Report) are on the move, closing higher by 6.66% to $55.93 on Thursday after the company impressed investors with its earnings results. The move has Cisco stock threatening to breakout to new highs on the year.
Earnings of 77 cents per share topped estimates by a penny and grew 18% year-over-year. Revenue of $12.96 billion grew 4% year-over-year and beat analysts' estimates by $70 million.
Better-than-expected third-quarter results are good, but management's guidance and reassurances regarding Cisco's business amid the trade war gave investors a confidence boost. It's got bulls wondering just how high shares can go provided the overall market cooperates. That's particularly true after the disappointing reaction to Arista Networks' (ANET - Get Report) earnings result earlier this month.
"On top of the positive headline results, software subscriptions as a percent of total software revenue (one of the more meaningful metrics in assessment of the company's transformation) was 65%, up 9 points year over year," The Action Alerts PLUS team wrote following the earnings results.
Trading Cisco Stock
Cisco stock hit a low $51.06 on Monday, bottoming about $1 per share above the 200-day moving average (and just pennies above its 38.2% retracement). While a drop down to $48 would have been highly attractive, bulls were able to salvage the stock before we got that big of a dip. Now Cisco stock is ripping.
The stock gapped up and opened near the 50-day and 20-day moving averages. Buyers have continued to bid the name higher throughout Thursday's session, as CSCO stock is approaching prior resistance. Bulls now need to see that the 50-day and/or 20-day moving average hold as support.
Further, I want to see how Cisco stock does with the $57 to $57.50 level should it continue higher in the short term. Twice in April this area served as resistance before shares got tripped up and pulled back more than 10%.Like Walmart ( WMT - Get Report) on its post-earnings rally, Cisco is going to try to push through resistance and run to new highs. Also like Walmart, Cisco stock is not yet overbought according to the relative strength index (RSI), while the MACD shows that momentum may be turning in bulls' favor (blue circles). Based on these two indicators, Cisco stock could have more room to the upside.
The question is whether resistance will limit the upside in the short term and whether trade-war worries will sap its momentum. See how Cisco stock handles $57 to $57.50 on the upside. On the downside, see that it holds support.