Click to Enlarge The past year-and-a-half has been nothing but painful for Cisco (NASDAQ:CSCO) shareholders, with the stock sliding from nearly $28 in April of 2010 to a low of $13.30 in early August. The salt in the wound is how the company still was doing well, and growing income, that whole time. It wasn’t white-hot growth, but it was nothing to complain about, either. Yet shares continued to get hammered as concerns of better competition in the networking and switches game lingered.
Things changed a couple of weeks ago, though, and the stock’s starting to suggest the market finally believes in the “new and improved” CSCO.
It’s no secret that the company finally had a much-needed head-on collision with reality in early 2011. Its big-ticket switch/router business was under attack by cheaper competition, and any profits that its networking division still was managing to generate were being siphoned off by its lower-margin consumer electronics businesses like the Flip camcorder. The decision to stop making the Flip wasn’t just about shutting down one product. It also marked the point where Cisco Systems started “getting back to basics” — the cash cows that got it to where it wanted to be in the first place.
Shares of CSCO have been on the mend since shortly after that point and are on the verge of fully breaking out of a long-term rut. The resistance line (orange) that has been a problem since mid-2010 is close to being breached — and if it is, look out above.
Yes, Cisco Systems has gotten to this point before and ultimately failed to move above that line. Things really are different this time, though. For starters, the rebound effort is unfolding at a much better (read “sustainable”) pace this time around. And the company has a much better game plan now than it did at any point in the prior 18 months.
Click to Enlarge Last but not least, Target (NYSE:TGT) has not just broken above its key ceiling at $52.15, but it has done so for a second time as of two weeks ago. And this time, it has done so with a great deal of conviction.
This actually is something of a diamond-shaped pattern, where the lower half of the formation is V-shaped. The top half isn’t a mirror image in this case, though — it’s simply a horizontal line acting as a ceiling. Or, it was acting as a ceiling, anyway. Now the ceiling has been knocked over.
After a multimonth brewing period, the bulls should be able to build on this move with relative ease. Investors might not want to get in too big of a hurry, though, as TGT is overextended in the very short run. We should see at least a small dip from here before the dust settles. As long as the rebound kicks in somewhere above $52.15, Target should be fine.
As of this writing, James Brumley did not own a position in any of the aforementioned stocks.