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CHART ANALYSIS

What's Up With Cisco Systems?

09/04/03 12:34:22 PM
by Andrew Hetherington

A triangle formation bodes well for higher prices in the near-term for Cisco.

Security:   CSCO
Position:   N/A


Figure 1: Daily chart of Cisco.

The daily chart shows a 6-month rectangle on perfectly diminished volume with a breakout and a throwback to the buy point in the $15.50 area. The next leg up towards the $20.00 area clearly demonstrated a consolidating tendency with the diminished volumes after the strong volumes on the rise. It was a fairly safe guess that higher prices would be on the near-term horizon. In addition, there is the early warning of higher prices in the $18.00 area with the higher volumes bouncing off of the bottom line of the recently created ascending triangle. This triangle has imperfect volume on the pattern creation but it still diminishes.


The third fan line has been created and is intact. This performance line I refer to is the safest way to preserve your capital. However, this line is often breached or broken during consolidation before resuming for much higher prices, so a word of caution is necessary. If you are a short-term speculator, this line will help optimize your profit and your stop-loss should be located just under the line. If you have a medium to long-term time horizon, then this line is not as important since it demonstrates a change in the short-term temporary trend. The market bottomed at 7177 and this rally was a good time to place your medium and long-term investments back into equities.

Figure 2: Weekly chart of Cisco.
Graphic provided by: SuperCharts.
 
On the weekly chart a third fan line is breaking topside of the much longer trend with increased volume. Also, this equity has overcome much resistance in the $13.50 area and I expect the next resistance to be in the $21.75 area. Anticipating another consolidation pattern to form once again before resuming the uptrend is likely. After this consolidation another move towards the $29.00 area is probable but this may take time.


Andrew Hetherington

Classic Dow Theorist who trades as a pure technician, using pattern recognition.

Toronto, Canada

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Comments

Date: 09/10/03Rank: Comment: I feel that there is a strong resistance area near 20. A closing above 19.50 is unlikely for the time being. A weekly closing above 19.15 is must and the next target becomes 27 in the medium term.
Date: 09/12/03Rank: 5Comment: 
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