Choose Your Timeframe – Then Choose Cisco Systems

• Posted by Greg Harmon
• on February 8th, 2012

Cisco Systems reported earnings Wednesday night and promptly went no where after the report. It was trading right where it finished the regular session. Analyst are talking positively about it and the company beat estimates, raised its dividend and raised guidance. Maybe it is the demeanor of John Chambers, or that it had already moved higher, I don’t know. But it seems like the positive numbers are lining up with positive technicals as well. Take a look.

The daily chart above shows the run, and with hindsight could have suggested the best entry. Notice that it bounced right after it retraced the entire move higher from March 2009 to April 2010. It also suggest why it may be resting at 20.40ish despite the good news. This is the 50% retracement of both of those moves. The Relative Strength Index (RSI) is pointing higher still and the Moving Average Convergence Divergence (MACD) indicator is is back positive and supporting more upside. 22 looks like the next significant level. But back out a bit to the weekly chart. This also looks good. and also gives a clue as to why it may consolidate. The RSI on this timeframe is bullish

and rising and the MACD is positive and increasing, both supporting more upside, but the price is right at the 200 week Simple Moving Average (SMA). A move over this and a look to the left suggests resistance as well at 22 and then 24 and 27. Above that it looks to complete a ‘W’ pattern to 33 around Thanksgiving according to the symmetry. Pulling back even further to the monthly chart shows a very long 10 year consolidation. The significance of the 27 and 33 levels are highlighted but from this timeframe it is clear that a break above 33 would be very significant.

Taking the move from basically zero to 80 and then the pullback to 10, the measured move higher would then take the stock to 95 on a break of 33. Sounds good huh? So what do you do now that they have reported and are going no where? Understand that the Technicals are pointing higher with a layering effect that could cascade to extreme bullishness. And that the Fundamentals did nothing to reverse the Technicals Wednesday. This might be your great opportunity.

Disclosure: I bought Call Spread Risk Reversals for earnings and will be looking to close them after the open Thursday. Then I will be looking at this stock for the long term account.

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