Cisco Systems (CSCO) is one of the tech sector benchmark components of the Dow Jones Industrial Average (INDU) . The stock has a solid year-to-date gain and is in bull market territory vs. its low, which was set in February.
In the longer term, Cisco's chart has scars from the popping tech bubble in March 2000, when the stock touched $82 a share. The stock has a post-bubble bottom of $8.12 from October 2002. The stock is also a laggard from the stock market crash of 2008. Cisco traded as high as $34.24 in November 2007, and this year's September high is still below the 2007 price milestone.
These longer-term observations may be reasons investors are reluctant to buy the stock today. But that does not mean that investors should not trade it.
In fact, Jim Cramer, TheStreet's founder and manager of the Action Alerts PLUS portfolio, wrote in his weekly roundup to Action Alerts PLUS subscribers that he and Research Director Jack Mohr still like Cisco.
"We remain bullish on CSCO for its transformation into higher-growth, higher-margin businesses that result in recurring revenue, which is essential in providing investors with visibility into the future. We believe CEO Chuck Robbins has made the right acquisitions to accelerate the transition and believe the long-term outlook remains positive," Cramer and Mohr commented. Their price target for the stock is $35.
Cisco is expected to report third-quarter earnings of 54 cents a share after the closing bell on Wednesday. Some analysts expect earnings to be as high as 59 cents a share, and TheStreet's Jim Cramer thinks Cisco's results may be ignored if a big market rotation occurs.
The daily chart features a "golden cross" set on April 15, where the 50-day simple moving average rose above its 200-day simple moving average, indicating that higher prices were ahead. It's also favorable to buy weakness to the 200-day simple moving average. This is shown in the daily chart below.
The weekly chart shows a red line through the price bars, marking the key weekly moving average (a five-week modified moving average). The green line is the 200-week simple moving average, the "reversion to the mean."
The study in red along the bottom of the chart is weekly momentum (a 12x3x3 weekly slow stochastic), which scales between 00.00 and 100.00, where readings above 80.00 indicate overbought and readings below 20.00 indicate oversold.
A negative weekly chart shows the stock below its key weekly moving average, with weekly momentum declining below 80.00 in a trend toward 20.00. A positive weekly chart shows the stock above its key weekly moving average, with weekly momentum rising above 20.00 in a trend towards 80.00.
Here's the daily chart for Cisco Systems.
Courtesy of MetaStock Xenith
Cisco Systems closed Monday at $31.37, up 15.5% year to date. It is in bull market territory, 39.7% above its Feb. 10 low of $22.46.
The stock has been above a "golden cross" since April 15, when the 50-day simple moving average rose above its 200-day simple moving average, indicating that rising prices were ahead. It also means that traders should buy weakness to the 200-day simple moving average, which was tested between May 3 and May 18, when this average was $26.80.
The price gap higher on May 19 was a positive reaction to earnings, released after the closing bell on May 18. The "golden cross" was in play when the stock set its 2016 high of $104.90 on April 26.
Here's the weekly chart for Cisco Systems.
Courtesy of MetaStock Xenith
The weekly chart for Cisco is positive, with the stock above its key weekly moving average of $30.89, and well above its 200-week simple moving average of $25.83. It was last tested during the week of Feb. 12, when the average was $23.61.
The weekly momentum reading is projected to rise to 47.41 this week, up from 42.17 on Nov. 11.
Investors looking to buy Cisco Systems should do so on weakness to $29.01, which is the 200-day simple moving average. Investors looking to reduce holdings should consider selling strength to $31.90 and $33.70, which are key levels on technical charts until the end of 2016.