July 30, 2012 at 13:42 PM EDT
No Rally Coming for Cisco (CSCO) Shares
Can Cisco Systems (NASDAQ: CSCO) shares get back to $20? With all due modesty, my previous research on Cisco has been spot on. On June 5, expecting a floor , I wrote, “ Though the shares are likely to decline back down to $15 this summer, the bulls should look to step in soon and ignite a near-term rally .” The floor held the stock. Additionally, Cisco shares nailed the $15 price target. Though the shares should experience some temporary stability at $15, I do not believe the stock is in a position to rally. Moreover, its $21.13 high will likely be the high price for months if not years. The blue circles highlight an impressive amount of activity near $17. Activity, in this case, is synonymous with indecision. Volume increased, yet price remained flat. These congestion periods are normal and indicate investor apathy. However, these lazy zones are important levels to monitor. Over time, these zones often develop into key support or resistance. Essentially, the more zones a stock develops the greater the future support/resistance the shares will have there. In the case of CSCO, it’s bad news for the bulls. The shares have three resistance zones to overcome at $17. Because I anticipate a summer rally in technology stocks, Cisco shares should stabilize before heading lower. This year my target is $13.25. So long as it remains under $17, long-term investors should find CSCO trading at $11 down the road.
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