The American multinational technology conglomerate headquartered in San Jose, California, Cisco Systems, Inc. (NASDAQ: CSCO) seems to be getting ready for a price surge according to its latest charts.
Bullish Indications
#1 Support at 200-SMA: The daily chart shows that the stock has strong support at the 200-day SMA. This seems like a good area for the stock to bounce higher.
Daily Chart – CSCO
#2 Ascending triangle pattern breakout support: CSCO’s daily chart shows that the stock had broken out of an Ascending Triangle pattern. An Ascending Triangle pattern is a bullish pattern and is marked in the chart in purple lines.
[hana-code-insert name=’adsense-article’ /]The stock had then moved higher and then formed a bearish double top pattern before moving down again.The breakout level of the ascending triangle pattern looks like a good level to bounce back higher.
#3 RSI Oversold: In the daily chart, the RSI is currently near oversold levels.
This implies that a possible reversal is around the corner.
#4 Fibonacci Support: Usually, after an up-move, stocks typically retraces to any of the key Fibonacci levels before surging back again.
CSCO had taken support at the 61.8% Fibonacci support level as seen in the daily chart. So, this seems like a strong support area for the stock.
#5 Uptrend Unbroken: As you can see from the weekly chart of CSCO, the stock’s uptrend is still unbroken as the stock has been forming higher highs and higher lows.
Weekly Chart – CSCO
#6 Above MAs: The weekly chart shows that the stock is currently trading above both 50-week as well as 200-week SMA. This implies that the uptrend is still quite strong.
#7 Bullish ADX and DI: The ADX indicator shows bullishness because (+DI) is greater than (-DI) and ADX and (+DI) are above (-DI).
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, you can buy the shares of CSCO between the levels of $48.50 to $51. These levels are marked as a green rectangle in the daily chart.
TP: Our target prices are $55 and $65.
SL: To limit risk, place a stop loss below $47 (for entry near $48.50) and $49.90 (for entry near $51). Note that this stop loss is on a closing basis.
The target potential upside for this trade is nearly 8% to 34% in the next 3-5 months.
- Entry at $48.50: For a risk of $1.50, the target rewards are $6.50 and $16.50. This is a nearly 1:4 and 1:11 risk-reward trade.
- Entry at $51: For a risk of $1.10, the target rewards are $4.00 and $14.00. This is a nearly 1:4 and 1:13 risk-reward trade.
In other words, this trade offers nearly 4x to 13x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down with high volume from the ascending triangle pattern breakout level. The sell-off of the stock could also be triggered in case of any negative news, overall weakness in the market, or any regulatory changes in its sector.
Happy Trading!
Tara
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