April 22, 2011

CISCO - Three reasons for a long trade

  • First chart is the Weekly time frame with Fibonacci levels for the rise from $13.61 TO $27.74. 
  • Price is trading at 78.6% for the above mentioned range. Week candle has given a DOJI at 78.6% Fib level.
  • Next chart shows a previous resistance turning as support scenario. Current week closing has acted as resistance previously and price is closer to the channel support line. So this confluence of support may give a bounce.
  • Third chart shows MACD positive divergence which can help the stock to bounce.
  • And if all the reasons fail stock may start to go down again so one should put a tight stop loss below 16.59 level.


  1. Very good post; but you see in the last candle a Doji, and i see a Hammer...
    But the analysis is Ok.for me.

  2. @El Aguila
    Body looked very small to me so i called it a Doji. It looks like a hammer too.
    Thanks for the comment

  3. Thanks for your response...
    A question, if i´ve to play last figure, it doesn´t matter Doji or Candle, what´s your opinion about a positive confirmation of a bottom figure. And at what price you´ll exit ´cause a sign of a failure to confirm a bottom?
    As you can see on daily graphs we´ve got a real Doji last friday, with min at Us.$16.86, if CSCO trade under that min. price, won´t you see that as a technical failure of bottom formation.
    Thanks in advance.

  4. If you go out to 2002 there is also an underlying trend line connecting higher lows, and weekly stochastics are oversold.

  5. @El Aguila
    The main reason for going long is the 78.6% Retrace. So if that is not valid and If the low of the week gets taken out then bears will get another chance. So as a trader when our reasons are not valid then our money is at risk. So a tight stop loss is suggested.

    For long term investors they should take a look at the month chart. As spengland said price is near a long term supporting trend line But for price to hit that trend line CSCO may go down to even 15.50 level and then turn up.

    For investors they should decide if they are going to buy here and hold it Or wait till price hits the trend line. Waiting for price to hit the trend line may give a greater risk reward ratio.

    For traders its very simple, Go Long from here towards $19 level with tight stop loss below last weeks's candle.

  6. @spengland
    Thanks for the fourth reason for going long.

  7. Solid strategie, thanks a lot for your explanation, very informative...
    Have a nice day. I´ll recommend your blog in mine.