Cisco Stock Price Set to Accelerate If It Clears This Hurdle
CSCO Stock: The Countdown Has Begun
Cisco Systems, Inc. (NASDAQ:CSCO) stock is currently sitting on the launch pad, all the preflight checks have been accounted for, and the countdown to lift off has begun. This may seem like an unorthodox way to describe an investment like Cisco stock, but the same was said with regards to the methodology I use to analyze investments.
I use technical analysis to analyze investments and create trading strategies. This unorthodox style of investment uses historical price and volume data to discern trends and forecast future prices. Technical analysis has been around for centuries and is still a popular style of analysis among traders.
This method of analysis is suggesting that there is a considerable amount of upside forecast in CSCO stock, and the run-up to attain this price objective is close at hand.
The following Cisco stock chart illustrates the price pattern that forecasts a price objective of $44.00.
Chart courtesy of StockCharts.com
The CSCO stock chart above illustrates a “cup and handle” pattern that has been in development for a little less than a decade. The pattern consists of a large rounded dip in price that occurs after a level of resistance is met. When price regains its footing and tests this level of resistance a second time, a smaller rounded dip is formed. This price action creates the “cup” and the “handle” respectively, and the pattern is completed when price breaks above resistance that rejected price on the previous two occasions.
This pattern is constructive in many respects, and aside from suggesting the next direction in price, it also serves to project a potential price objective. This price objective is obtained by projecting the depth of the cup above the level of resistance that defined this pattern. This was the method that suggested the $44.00 price objective in Cisco stock.
This large and constructive cup and handle technical pattern has been in play since July 2016, when Cisco stock exited the pattern via a breakout in an upward direction. The size and scope of this pattern is now suggesting that a powerful move to the upside is in development, but there is one last hurdle that CSCO stock needs to overcome.
The following stock chart illustrates the hurdle that Cisco stock needs to overcome in order to confirm that a power move is in development.
Chart courtesy of StockCharts.com
The CSCO stock chart above illustrates a number of key developments that are in the works.
Shortly after the breakout, Cisco stock stalled at $31.50, and this level of resistance, that is highlighted in purple, was created. This level of resistance needs to be overtaken in order to confirm that the price objective suggested by the cup and handle pattern is in play. I believe that the price of CSCO stock will accelerate after this level is taken out.
The indicator in the lower panel labeled “MACD” is converging. MACD is a simple, yet effective trend-following momentum indicator. Signal-line crossings are used to distinguish between bullish and bearish momentum. A bullish cross would increase the odds that price will overtake resistance, which will confirm the price objective set out by the cup and handle pattern.
The trend line highlighted in blue represents the level of resistance that created the cup and handle pattern. This level should now act as a level of price support that also serves to define risk. If CSCO stock closes below this trend line, it would suggest that the breakout and the bullish ramification from the cup and handle pattern have failed, and are no longer in play.
The following Cisco stock chart illustrates the price action that supports a break above resistance.
Chart courtesy of StockCharts.com
The price action on the CSCO stock chart above is both bullish and healthy. It suggests that Cisco stock will be attempting to break above resistance.
This price action consists of an impulse wave that advanced CSCO stock and a consolidation wave that served to unwind any overbought conditions and set up the next impulse wave.
This new impulse wave that is now in development is set to test resistance once again, and together with an ensemble of bullish indicators, it suggests that Cisco stock is going to follow through with the cup and handle pattern, and then price is set to accelerate.
Bottom Line on Cisco Stock
Cisco stock is set up for a substantial run, suggested by the cup and handle pattern. In order for this run to take place, CSCO stock needs to break above a resistance level. Upon a successful breakout, I believe Cisco stock will accelerate to the upside.
