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Technical View - Cisco



Note: the following analysis is formulated as an assimilation of Fibonacci, DeMark, Elliott Wave and other technical indicators. It is offered as education and not intended as advice in any way.


Cisco has declined some 30% from its January highs in what looks like a three-wave fashion. The recent lows on 5/17 were not confirmed by daily momentum measures and came with the C wave of the ABC decline from the January highs being nearly 0.618 times the size of the A wave, a common Fibonacci relationship. While a more bearish intermediate term interpretation of the technicals is possible, the more likely of the two interpretations may call for a new impulse wave off the 5/17 lows to resolve decidedly higher (above the April highs at near $25) and perhaps even to new highs above the January $29.39 level. For now however, we'll take it one step at a time and attempt to decipher the short term path and wait to see how the intermediate term trend plays out.

Vis-à-vis the short term then, the move up from the 5/17 lows has all the looks of a near completed "5" wave move with the 5th wave extending (i.e. the 5th wave being longer than both the 3rd and 1st impulse waves and the 1st and 3rd impulse waves being nearly equal). Near term these 5 waves up from 5/17 are expected to correct to lower Fibonacci support in the $22.00-$22.80 area where support is expected to be found. It is possible that our anticipated correction does not take place until prices head toward the $24.70 region; if that's the case, the best scenario may be to still await a correction of this impulse off the 5/17 lows. That CSCO is also the 4th largest weighting in the NDX, at 4.85% of that index's weight, lends further evidence to this intermediate term bullish view of CSCO. In the NDX I am looking for a nice multi-day (8-15 sessions) correction to lower support to take place before getting a move higher.

This is precisely the view in CSCO as well. Ideally a correction in CSCO will play out over the next 8-15 sessions and find support in the cited levels. That will be a key area, depending on how prices reached that level (corrective or impulsively) for the next possibly much larger impulse wave up based on the analysis. For now we will wait to see if an anticipated correction in CSCO that traces out a corrective pattern toward lower supports unfolds.

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No positions in stocks mentioned.

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