Cisco Systems, Inc. (CSCO​) is a major networking and communication device company that is reinventing itself into a more diversified information technology company. Cisco is a component of the Dow Jones Industrial Average and is one of the "Dogs of the Dow" for 2017. Cisco is underperforming the Dow 30, and many investors may not realize that the stock is well below its tech-bubble peak of the year 2000.

Cisco reports earnings after the closing bell on Wednesday and is expected to post earnings per share of between 59 cents and 61 cents with relatively flat year-over-year comparisons. Investors will likely focus on gross margins as a key metric along with forward guidance. Cisco's performance segments are infrastructure platforms, applications, security, and other products and services. The stock has a P/E ratio of 17.92 and a solid dividend yield of 3.41%.

The stock closed Tuesday at $34.04, up 12.6% year to date and up 16.9% from its post-election low of $29.12 set on Dec. 2. Cisco stock set its post-election high of $34.75 set on Nov. 1. (See also: Google, Cisco Ink Cloud Deal to Take on AWS, MSFT.)

The long-term weekly chart for Cisco

Long-term weekly technical chart for Cisco, Inc. (CSCO) stockCourtesy of MetaStock Xenith

The weekly chart going back 20 years show that Cisco's all-time intraday high of $82.00 was set in March 2000. As the tech bubble popped, the stock traded as low as $8.12 in October 2002. The horizontal lines are the Fibonacci retracement levels of this crash of 90%. The key take-away is that the recent high of $34.75 is the highest high since February 2001 but is well shy of the 38.2% retracement of $36.57.

The short-term weekly chart for Cisco

Short-term weekly technical chart for Cisco, Inc. (CSCO) stockCourtesy of MetaStock Xenith

The weekly chart for Cisco is positive but overbought, with the stock above its five-week modified moving average of $33.74 and well above its 200-week simple moving average, also known as the "reversion to the mean," now at $28.31. This key average was last tested at $23.61 during the week of Feb. 12, 2016. The 12 x 3 x 3 weekly slow stochastic reading is projected to slip to 88.19 this week, down from 89.56 on Nov. 10.

Given this chart and analysis, my trading strategy is to buy weakness to my annual and monthly value levels of $32.53 and $31.66, respectively, and to reduce holdings on strength to my semiannual and quarterly risky levels of $34.93 and $35.66, respectively. (For more, see: Arista to Grab Market Share From Cisco: Davidson.)

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