Monitor These Crucial Cisco Stock Price Points as Shares Surge Post-Earnings and Workforce Reduction

Essential Highlights

• Cisco Systems' shares surged in premarket trading on Thursday after the company reported earnings surpassing Wall Street expectations and revealed plans to reduce its global workforce by 7%.
• Earlier this month, the stock dipped below the neckline of a head and shoulders pattern, though subdued trading volumes suggest limited conviction behind the decline.
• Key resistance levels to watch for Cisco shares include $48.50, $50, $52.50, and $58, where selling pressure might emerge.

Shares of Cisco Systems (CSCO) jumped significantly in premarket trading Thursday following the release of earnings that exceeded analysts' forecasts and the announcement of a 7% reduction in its worldwide workforce.

Despite a roughly 10% decline in its stock price since the beginning of the year through Wednesday’s close, Cisco is focusing on investing in vital growth areas to diversify its revenue streams. The company’s core networking segment has faced ongoing pressure as enterprise clients increasingly transition their operations to cloud-based solutions.

Approximately two hours before the market opened, Cisco shares were trading up 6% at $48.17.

Below, we analyze Cisco’s stock chart using technical analysis to pinpoint crucial price levels following the earnings release.

Formation of a Head and Shoulders Pattern

Between April 2023 and January 2024, Cisco shares formed a head and shoulders pattern, often signaling a potential market peak. Additionally, a bearish death cross occurred in December when the 50-day moving average crossed below the 200-day moving average, indicating a possible downtrend.

Although the stock fell below the neckline of this pattern earlier in the month, the low trading volume suggests weak momentum behind this move. The anticipated opening above the neckline following the strong earnings report could shift investor sentiment positively.

Key Resistance Levels to Watch

After Cisco’s post-earnings rally, investors should keep an eye on four significant price points where the stock might face selling pressure during any upward retracement.

First, resistance may appear near $48.50, just below the descending 200-day moving average, a zone where sellers might take profits along a multi-month downtrend line originating from the September 2023 peak, which also represents the “head” in the head and shoulders pattern.

If the stock advances beyond this point, it could reach $50, a level that historically acted as resistance between November 2022 and May 2023.

Further gains might push the shares to around $52.50, close to the two “shoulders” of the head and shoulders pattern formed in April 2023 and January 2024, where selling interest could intensify.

Finally, a substantial upside reversal could test the $58 mark, the top of the head and shoulders pattern. Closing above this level would negate the bearish formation. Notably, a price projection based on previous upward moves suggests a target near this same area.

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As of the article's publication, the author holds no positions in the securities discussed.

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