NEW YORK ( TheStreet) -- Cisco (CSCO) - Get Cisco Systems, Inc. Report has gone nowhere since its seven-week rally began to fail on May 22. Is a new rally ahead, or is the stock on the verge of a steep pullback?
The stock has remained in a very tight range since May 22, when it fell below the lower band of a bull channel that had been in place since the late March low. The trade action that followed has been listless, while volume has returned to below-average levels. Without a positive jolt soon, Cisco's channel break may prove to be the beginning of a steep pullback.
Currently Cisco is stabilizing near the middle of its four-week range, but the pattern near the recent highs is taking on a more dangerous look. The stock began to lose upside momentum in late February as it marked a new 2015 high. The stock suffered a deep pullback soon after, and by the March low, it had dropped over 12%.
As March came to a close, Cisco began to recover, and by early April, a powerful bull channel was under construction. The channel carried Cisco back to within 50 cents of its March peak, but lacked the juice to complete a retest.
The question now is whether Cisco is consolidating ahead of a new rally or if it's on the verge of a steep pullback. There are tight parameters in place that will tell the tale.
On the bullish side, a close above the May high of $29.90 on accelerating trade would indicate investors are gaining interest once again. Once past the May high, the stock would be clear to make a run past the 2015 peak.
On the bearish side, a close below the May low of $28.70, which is marked by the 50-day moving average as well, would mean bullish interest continues to dry up. A pullback, possibly back down to the 200-day moving average of $26.85, may be needed to reinvigorate investors.
At the time of publication, Morrow was long CSCO.