Setting Up Cisco Systems (CSCO)
Shares of Cisco Systems (CSCO) are trying to recover from last week's pullback and gap below support after reporting earnings. I mentioned the company topped expectations but offered lower guidance for the current quarter and that there might be a trade afterwards.
As you can see from the chart below, near-term resistance is at $31.75-$32 with additional hurdles at $32.50 and the 100-day moving average. Shaky support is at $31.25-$31 and the 200-day moving average with risk to $30.50 on a move below the latter.
The 50-day moving average is in a downtrend and could signal further weakness if shares close below $30.50 over the near-term. Bearish traders can target the CSCO June 31 puts (CSCO170616P00031000, $0.25, down $0.18), or the CSCO July 31 puts (CSCO170721P00031000, $0.60, down $0.20), on a move below $30.75-$30.50. A continued backtest to the $29.50-$29 area could come on a close below the latter.
With shares showing some strength, there could be an opportunity for a trade if CSCO can clear $31.75-$32 this week. The CSCO June 32 calls (CSCO170616C00032000, $0.30, up $0.05), or the CSCO July 32 calls (CSCO170721C00032000, $0.50, up $0.10), will be active if shares clear to clear the aforementioned resistance levels. Today's high on the stock has reached $31.75.
While it's too early to get into CSCO, I wanted to show you the possible trade setup and what I'm looking at. I'm more bullish than bearish on the stock because I know the company loves to "sandbag" their numbers from time-to-time to keep Wall Street analysts in check.
As far as the market, the bulls are going for a hat trick and third-straight day of gains after setting the pace for the first half of action. The Dow is higher by 80 points to 20,885 while the S&P 500 is adding 9 points to 2,391. The Nasdaq is up 36 points to 6,120 and the Russell 2000 is gaining 5 points to 1,372.
I have updated our current trades so let's go check the tape. I'm still looking at possible New Trades and will send out a New Trade alert if I see something I like.