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.|
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