The stock's nice run off the early April lows appears to have run out of steam. CSCO shares gained just less than 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 shares are 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 Dow Jones average ticked near its high for Thursday in the afternoon, CSCO's price 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.
As the end of the week nears, a healthy pullback will be needed before Cisco shares are in position to make a run at their 52-week highs.
A drift down to the 200-day moving average, which hasn't been tested since the Oct. 15 flush, is unlikely. Cisco shares will probably retrace roughly half of the April rally.
I am long the stock and will be a buyer on weakness. The initial layer of support is near $28. At the market's close on Thursday, the stock price was $28.81.
Cisco is scheduled to report its third-quarter results for fiscal 2015 on Wednesday afternoon.
Editor's Note: This article was originally published on Real Money Pro on Thursday, May 7, 3:24 p.m. EDT.