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CISCO SYSTEMS: Are You Telling Us Something?

07/16/04 08:55:36 AM
by Koos van der Merwe

The market seems to be moving sideways in the summer doldrums. CNBC presenters keep talking about technology stocks bringing the market down. Yet Cisco...hmmm... what are you telling us?

Security:   CSCO
Position:   Accumulate

The chart shows the price of Cisco moving upwards after a relatively flat period from December 2002 to April 2003. The price topped out on January 20th, 2004 at $29.39. From that date, it has been falling in what appears to be a wedge formation, breaking out of the formation on May 21st.

Now, by all accounts, Cisco should now rise to reach its target of $37.42. This target is determined by the following calculation: $29.39 - $12.90 = $16.49 + $20.93 = $37.42. What has happened so far is that the price rose to $24.20. Notice how the the stochastic oscillator touched its overbought levels at that price. After that prices fell back to find support at $21.92, a minor previous pivot point. This it did on declining volume, which really is a sign of strength. At the same time, the stochastic was at oversold levels, but a buy signal has not been given, yet.

Cisco Systems
Graphic provided by: AdvancedGET.
What now? If that support level at $21.92 were to hold you could see a rise to test the resistance level at $24.20. If the price were to break above this level you could very well see Cisco trying to reach its target of $37.42.

Koos van der Merwe

Has been a technical analyst since 1969, and has worked as a futures and options trader with First Financial Futures in Johannesburg, South Africa.

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Date: 07/16/04Rank: 5Comment: 

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