Cisco Systems Faces Critical Test at Key Risk Threshold

Cisco Systems, Inc. (CSCO) has been a prominent member of the Dow Jones Industrial Average since June 8, 2009. This technology leader specializes in Internet Protocol networking solutions tailored for the communications and IT sectors.

Prior to its inclusion in the Dow, Cisco's stock traded at $82.00 in March 2000, dipping to a low of $8.12 by October 2002. On Tuesday, August 14, shares closed at $44.00, marking a 14.9% gain year-to-date and an 18.4% increase from its 2018 low of $37.16 on February 6. The stock remains 5.1% shy of its 2018 peak of $46.37 reached on June 10. In comparison, the Dow 30 ended Tuesday at 25,299.92, up 2.3% year-to-date, down 4.9% from its January 26 high of 26,616.71, and 8.4% above its April 2 low of 23,334.52.

Analysts anticipate Cisco to report earnings per share between 69 and 70 cents following the market close on Wednesday, August 15. The stock surged after its February 14 earnings release, hitting its first 2018 high of $46.16 on March 13. However, after the May 16 earnings announcement, shares experienced a gap down. The stock found support at the semiannual value level of $41.15 on July 13. Sales growth is projected at 2.6% for 2018 and 3.1% for 2019, with profit margins being a critical focus. Among analysts covering Cisco, 19 recommend buying while eight suggest selling.

Cisco Systems Daily Chart

The daily chart reveals that since October 16, 2017, Cisco’s shares have remained above a "golden cross," a bullish signal where the 50-day simple moving average surpasses the 200-day simple moving average, suggesting upward momentum. Key horizontal markers include the semiannual value level at $41.15 and the quarterly risk threshold at $44.18.

Cisco Systems Weekly Chart

The weekly chart remains bullish with the stock trading above its five-week modified moving average of $43.20. It is also significantly above the 200-week simple moving average, considered the "reversion to the mean," currently at $31.91. The 12 x 3 x 3 weekly slow stochastic indicator is projected to close this week at 44.22, rising from 34.96 on August 10, indicating strengthening momentum.

Based on this technical analysis, the recommended trading approach is to accumulate Cisco shares on dips toward the semiannual value level of $41.15 and to trim positions when the stock rallies to the quarterly and monthly risk levels of $44.18 and $47.62, respectively. The annual value level stands at $29.88 as a longer-term support benchmark.

For further insights, see: Cisco Stock Climbs Amid Reports Amazon Won't Sell Switches.

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