20 de May de 2019

Cisco Systems is vulnerable for a further loss of 11%

Cisco Systems, Inc (NASDAQ: CSCO) has already fallen from $49.47 to $43.92, a loss of 11% in just 10 calendar days. But I suspect there is more to come. More precisely, I suspect that Cisco Systems is vulnerable for a further loss of 11% or more. The trigger for that will be a close under $45 this week. 

As regular readers of this column know, I take the Elliott Waves approach to analyzing the market. My most recent contribution covered Nike Inc (NYSE: NKE) and I was suggesting that Nike could be in for a more dramatic sell off. That view will get reinforced if we close this week under $78. Let us now examine some charts of Cisco.

A close look at the 3-wave move in CiscoThomson Reuters

We see several key Elliott Wave features in the first chart above. First of all, we can see that both the impulse waves shown are made up of 5 sub waves. The second wave decline was is three waves. The third wave rally reached a 161.8% measure of wave 1. For the moment, I am assuming that we are still in a 5-wave uptrend, but this could easily change if the Earnings Report next month comes a cropper! The down move then will be more dramatic.

The next chart establishes how deep a wave 4 can potentially go. That will prepare us for what action to take should the stock continue its decline as anticipated.

Wave 4 targets for CiscoThomson Reuters

Anyone who has been in the markets for some years will know that we seldom turn around abruptly after a steep sell off. This is likely the case with Cisco.

Why do I think this sell off has got more room on the downsideThomson Reuters

It is often useful to draw simple trend lines to verify if they add some additional weight to what the Elliott Wave analysis tells us. This is illustrated in the next couple of charts.

Early supports near the steep trend line might give wayThomson Reuters

Very often connecting prior tops to recent lows helps identify next levelsThomson Reuters

In summary, given the steep sell off that Cisco has experienced recently, and the fact that wave 2 was relatively shallow, we should expect that wave 4 will potentially see the price test the 38.2% retracement level of around $39.15. A weekly close below $45 should set the tone for this development. Once that close is seen, recoveries will be short-lived.

Article source: https://www.forbes.com/sites/greatspeculations/2018/10/11/cisco-systems-is-vulnerable-for-a-further-loss-of-11/

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