Cisco Systems Reports Testing a Risky Level

Cisco Systems, Inc. (CSCO) has been a component of the Dow Jones Industrial Average since June 8, 2009. This tech giant makes Internet Protocol networking products for the communications and IT industries.

Before being a Dow component, Cisco was an $82.00 stock back in March 2000 and traded as low as $8.12 in October 2002. On Tuesday, Aug. 14, the stock closed at $44.00, up 14.9% year to date and up 18.4% from its 2018 low of $37.16 set on Feb. 6. The stock is 5.1% below its 2018 high of $46.37 set on June 10. By comparison, the Dow 30 closed Tuesday at 25,299.92, up 2.3% year to date, down 4.9% from its Jan. 26 high of 26,616.71 and 8.4% above its April 2 low of 23,334.52.

Analysts expect Cisco Systems to post earnings per share of 69 to 70 cents when the company reports results after the close on Wednesday, Aug. 15. The stock popped higher following earnings reported on Feb. 14 and set its first 2018 high of $46.16 on March 13. Following its next earnings report on May 16, the stock gapped lower. Weakness held my semiannual value level of $41.15 on July 13. Sales are expected to grow 2.6% in 2018 and 3.1% in 2019, but margins will be the key metric. Of the analysts covering the stock, 19 rate Cisco a buy and eight rate it a sell. (See also: Cisco Stock May Plunge Despite Bullish Forecasts.)

The daily chart for Cisco Systems

Daily technical chart showing the performance of Cisco Systems, Inc. (CSCO) stock
Courtesy of MetaStock Xenith

The daily chart for Cisco shows that the stock has been above a "golden cross" since Oct. 16, 2017, when the shares closed at $33.54. A "golden cross" occurs when the 50-day simple moving average rises above the 200-day simple moving average and indicates that higher prices lie ahead. The horizontal lines are my semiannual value level of $41.15 and my quarterly risky level of $44.18.  

The weekly chart for Cisco Systems

Weekly technical chart showing the performance of Cisco Systems, Inc. (CSCO) stock
Courtesy of MetaStock Xenith

The weekly chart for Cisco is positive, with the stock above its five-week modified moving average of $43.20. The stock is well above its 200-week simple moving average, which is the "reversion to the mean," now at $31.91. The 12 x 3 x 3 weekly slow stochastic reading is projected to end this week at 44.22, up from 34.96 on Aug. 10.

Given these charts and analysis, my trading strategy is to buy Cisco shares on weakness to my semiannual value level of $41.15 and reduce holdings on strength to my quarterly and monthly risky levels of $44.18 and $47.62, respectively. My annual value level lags at $29.88. (For more, see: Cisco Stock Rises on Report Amazon Not Planning to Sell Switches.)

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