Shares of Cisco Systems, Inc. (NASDAQ:CSCO), although higher by nearly 11% for the year, have seen a choppy going for the most part. With corporate earnings season kicking into high gear this week, the immediate-term outlook for CSCO stock could be all over the place, yet into year-end and looking at the charts, the stock is constructively positioned.
So you know, Cisco reports its next batch of earnings on Nov. 15, which is the next big toggle date for the stock in the near term.
One of the often misunderstood stock market statistics is that strong index performance years tend to finish out the year strongly as well. The underlying dynamics of this are likely closely linked with fund manager underperformance. Most fund managers fail to beat an index such as the S&P 500 in any given year, against which their performance is benchmarked.
As a result, when the fourth quarter arrives and these fund managers are underperforming their indices, they flip into full-on chase mode and buy things higher that have already had a good run year-to-date.
Technology stocks as a group had a great run in the first three quarters of 2017 and if the aforementioned dynamics once again unfold into year end this year, then tech names such as CSCO stock should stand a decent chance of another leg higher in the remaining months of 2017.
CSCO Stock Charts
Moving averages legend: red – 200 week, blue – 100 week, yellow – 50 week
Moving on to the charts we see that CSCO stock over the past years has pushed higher in a well-defined channel (much like many other technology and semiconductor-related stocks).
After topping out in February of this year however the stock fell into a bigger picture consolidation phase, which through this lens is remains in to this day.
Moving averages legend: red – 200 day, blue – 100 day, yellow – 50 day
On the daily chart we see that within this year-to-date consolidation phase, CSCO stock in recent weeks did string together a solid 10% rally that now once again has it trading near the very upper end of the 2017 trading range. In fact, over the past three weeks CSCO has begun to coil up below a well-defined diagonal line of resistance, which now gives traders some clear levels to focus around;
A daily push and hold above the $34 area on good volume could set up a next leg higher for the stock toward $36. Traders however should respect the Nov. 15 earnings date, which is to say that should CSCO stock manage to push past $34 before the earnings date, long trading positions are better to be reduced or exited and the stock reevaluated after the earnings report.
Check out Serge’s Daily Market Outlook for Oct. 16.
Tell us what you think about this article! Drop us an email at editor@investorplace.com, chat with us on Twitter at @InvestorPlace or comment on the post on Facebook. Read more about our comments policy here.
Take Serge’s quiz to find out which trading strategy best suits your personality.
