CSCO gained just under 10% after quickly recovering from the late March breakdown. During last month's rally, the stock remained inside a very orderly bull channel. As this month begins, CSCO is falling out of this healthy pattern and may be headed for a deep pullback.
Despite the impressive rally in the Dow Jones Industrial Average, Cisco has been in the red for the bulk of the session. As the DJIA ticked near its high of the day this afternoon, CSCO remained near its lows. It's possible the news of CEO John Chambers' departure in July has moved investors to the sidelines. The expectation of his exit may have kept a lid on volume during the last leg of the April rally. The light volume action has put the stock in a vulnerable position.
My read on Cisco as we near the end of the week is that a healthy pullback will be needed before the shares are in position to make a run at the 52-week highs. A drift down to the 200-day moving average, which hasn't been tested since the Oct. 15 flush, is unlikely.
I expect the shares to retrace roughly half of the April rally. I am long the stock and will be a buyer on weakness. Initial layer of support is the near $28. Cisco is scheduled to report its fiscal third-quarter results on Wednesday afternoon.