Where and Why You Can Steal Cisco Stock

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It’s not every day investors have a chance to practically steal from the stock market. But when it comes to Cisco Systems (NASDAQ:CSCO), now more than ever, off and on the price chart CSCO stock looks like a diamond in the rough. Let me explain.

Where and Why You Can Steal Cisco Stock
Source: Valeriya Zankovych / Shutterstock.com

Oil has taken over the headlines for a second straight session as the once-prized commodity plunges deeper into multi-decade lows. The bearish price action is a far cry from past “peak oil” worries over prior decades. And nowhere is that more evident than black gold’s May contract. The now-expired front month tumbled into a seemingly impossible negative price structure due to storage and demand concerns tied to the novel coronavirus.

But what’s that have to do with CSCO stock? Nothing and everything, all at the same time.

Knife-catching Low

The tumble in oil and energy stocks is fueling fears of a worsening economic fallout. And on Wall Street that concern has translated into the Dow Jones Industrial gauge being pressured by nearly 2.5%. At the same time, Cisco’s larger drop of about 4.5% suggests shares are even less immune to today’s raised worries. Still, the big picture for networking and security services stock points at an even-rarer opportunity. Today’s reignited worries are allowing longer-term investors to buy Cisco shares at eye-catching, valuable prices.

To be fair, buying Cisco stock has been cheaper. Compared to last month’s rampant “indiscriminate selling,” a knife-catching low near $32 in CSCO is still well-beneath today’s market price around $40.55. To be exact or roughly so, it’s 27% cheaper. But cheap isn’t always the same as value.

Bottom-line, the Fed and U.S. Treasury have shown their hands the past few weeks with trillions in quantitative easing and stimulus packages. And those powerful actions followed Cisco’s leading bear market low on March 16. To be appreciated, what today’s investors are giving up in absolute price, buyers gain in more sure-footed value. That includes CSCO stock’s 3.39% dividend, as well as historically low price-to-sales and free cash flow to support shares. Now and with a confirmed and well-supported low on the price chart, the sum total “still” amounts to today’s investors practically stealing Cisco shares from the market.

CSCO Stock Monthly Chart

Source: Charts by TradingView

Barring Tuesday’s bearish episode in the market, there’s been much talk in recent weeks of a meaningful bottom now in place in the broader averages. And rightfully so, in our view. But CSCO stock is in an even-stronger technical position for buying than blue-chip peers like Apple (NASDAQ:AAPL), Chevron (NYSE:CVX), Walmart (NYSE:WMT) or Walgreens (NASDAQ:WBA) and whose businesses span across industry groups.

Along with Cisco’s alluring cheap fundamentals, what sets shares apart as a buy is the monthly chart. An eight-month correction which began last August shed approximately 43% from CSCO at its absolute low. The longer draw-down, unlike some might have you think, is a good thing. But what makes this tech stock’s correction more attractive than in many of its peers is Cisco’s dyed-in-the-wool bullish hammer set inside layers of durable, longer-term Fibonacci support. The well-detailed chart provided above is sufficient evidence of that price affirmation.

Now — and with CSCO stock pulling back inside the pattern bottom and coupled with an oversold stochastics on the cusp of a bullish crossover — longer-term investors have a door that’s opening for a big-time score.

Paying Up for Protection

My advice is to put shares on the radar for purchase if a rally can take CSCO back above the March hammer high of $41.51. Entering into a Cisco position is also contingent on stochastics generating a buy signal. That might mean paying slightly more for shares, but it’s an additional layer of protection which looks appropriate in today’s market.

If this Cisco strategy triggers, I’d suggest setting a 10% stop-loss. That allows for sufficient leeway off and on the price chart. Optimistically though and without having to be too hopeful, those buyers should be on their way to fresh relative and even new all-time-highs in the next 12-18 months as one of the more compelling bottoms in the market turns into a more friendly looking bull.

Disclosure: Investment accounts under Christopher Tyler’s management do not currently own positions in securities mentioned in this article. The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.

The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.


Article printed from InvestorPlace Media, https://investorplace.com/2020/04/where-and-why-you-can-steal-csco-stock/.

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