50%+ Upside in Cisco Stock

Follow by Email
Visit Us
Follow Me

This article was originally published on this site

By: Patrick Brik BAS

September is when market turmoil usually makes its home, so it is always a good idea to batten down the hatches around this time of year. If you’re ready for what the market has to throw at you, then this time of year can be very fruitful for those anticipating weakness. Cisco Systems, Inc. (NASDAQ:CSCO) stock has been doing quite well in 2016, hitting new 52-week highs, but if selling is the order of the day, then no stock is safe.

I find it absolutely necessary to always monitor my trades and make sure that the reasons that got me into the trade are currently alluding to the same trading bias. Bullish stocks will trade down to levels of support during market weakness, but what sets the best-performing stocks apart from the lot is their inability to do technical damage to the charts when the prices pull back.

The following chart illustrates the main levels of support for Cisco stock.


Chart courtesy of StockCharts.com

There are two main levels of support that have been highlighted on this chart of CSCO stock. The horizontal level of support has acted as resistance for much of 2015 and half of 2016, and the uptrend line has supported the share price since July 2011.

Horizontal support is currently sitting at $29.00, and this price was a level of resistance for a little over a year until Cisco stock was finally able to break above it. As is always the case with technical analysis, when a level of resistance is broken, it becomes a level of support. If CSCO stock trades lower to test this level, it would reinforce the bullish premise if shares were rejected by this price.

The uptrend line has served as support since shares bottomed in 2011. This line is created by connecting the troughs on the chart of Cisco stock. As long as shares are trading above this line, the trend is towards higher prices.

If market weakness does prevail, I would prefer if Cisco stock remained above the horizontal support level, as that outcome would be the most bullish. A test of the uptrend line would be the next level of support that would need to hold for my bias to remain bullish.

The news is not all bad, and the following CSCO stock chart illustrates the bullish signal that is suggesting further price appreciation.


Chart courtesy of StockCharts.com

On the chart, you will notice the lower panel labeled “MACD.” Moving average convergence divergence (MACD) is a simple and effective trend-following momentum indicator. Signal-line crossings are used to distinguish between bullish and bearish signals.

The scale I used on the chart above uses monthly bars. The use of longer-term bars will effectively smooth out the data and generate fewer signals. I find that longer-term signals are detrimental in determining  the longer-term trend.

The bullish MACD cross in June reaffirms the bullish premise and coincided with a move to a new 52-week high. At this current juncture, CSCO stock is looking very healthy and new highs are indeed a possibility, but seasonality cannot be dismissed.

The following Cisco stock chart illustrates possible upside targets.


Chart courtesy of StockCharts.com

There are two parallel lines that define this trend. The pattern known as a ascending channel has two trend lines that define the upper and lower bounds. The share price oscillates between these two lines for as long as the trend permits.

It has been a long time since CSCO stock tested this upper range, and it would be a possible target if the rally higher is to continue. This trend line currently sits at $49.00 and represents a return of 57% from current levels. It is worthy to note that this line of resistance has a positive slope so, as time progresses, the target price continues to move higher.

The Bottom Line on Cisco Stock

CSCO stock is sitting in bullish alignment, with many indicators supporting this premise. Seasonal weakness cannot be dismissed, so key levels of support that maintain the bullish bias have been mentioned. My bias on Cisco stock is bullish, and will remain bullish until the chart gives me reason to alter that bias.