Cisco Systems, Inc.: These Charts Say CSCO Stock Could Soar
CSCO Stock: A Trifecta of Bullishness
In this article, I’d like to highlight Cisco Systems, Inc. (NASDAQ:CSCO) stock because it will give me an opportunity to address an issue.
Many technical analysts can look at the same data and come up with completely different conclusions. It can come down to different perspectives, emotional or cognitive biases, or, as in this case, distinct patterns embedded within one another. The latter may sound like a rare phenomenon, but it really isn’t; in fact, it is not uncommon for patterns to be imbedded within one another.
At first glance, I found three patterns in the Cisco stock chart. Yes, you read that correctly—I found three embedded patterns on the same CSCO stock chart using the same timeframe.
Below, I will walk you through each pattern and explain the significance of each. If all three patterns are exhibiting the same bias, then we should have little doubt regarding the direction of CSCO stock going forward.
The first pattern I saw was the descending triangle, illustrated in the chart below:
Chart courtesy of www.StockCharts.com
CSCO stock spent the duration of five-and-a-half years forming a descending triangle. In general, this pattern is seen in a bearish light based on the trading action. Each and every time CSCO stock approaches the support level at $12.00, buyers appear to support the price. Each subsequent rally ends at a lower high, as sellers are willing to exit positions at a lower high. Usually these patterns break down but that is not always the case. Descending triangle patterns often have five points of contact before the pattern breaks in either an upward or downward direction.
Cisco stock completed these five points of contact and broke out to the upside in January 2013, confirming a bullish bias. Based on this pattern, the initial target was the old high at $29.00, where the descending triangle pattern began.
The second pattern I found was a double bottom pattern, illustrated in the chart below:
Chart courtesy of www.StockCharts.com
A double bottom is a reversal pattern that appears at the bottom of a trend. It is marked by two consecutive troughs. The reversal is confirmed when share prices close above the peak that separates the two troughs.
In November 2014, CSCO stock confirmed the double bottom and reaffirmed the bullish bias. The price objective based on this pattern is $36.00 per share.
The third pattern I found was a cup-and-handle pattern, which is illustrated in the final chart below:
Chart courtesy of www.StockCharts.com
The cup-and-handle pattern is a bullish pattern, with its name describing the shape it forms on the chart. Upon confirmation, this pattern signals a bullish continuation of the current trend. The projected price objective of this pattern is determined by the depth of the head projected above the horizontal resistance level. The pattern is confirmed when share prices close above the horizontal resistance line.
In July, shares of CSCO stock closed above the horizontal resistance line and confirmed the pattern, reaffirming the bullish bias. The price objective of this pattern is $46.00 per share.
The Bottom Line on CSCO Stock
Many patterns can be embedded within the same chart in the same timeframe. For this reason, it is wise to examine each in order to verify and confirm the bias as being either bearish or bullish.
In this case, I found three embedded patterns in Cisco stock and all three were confirming a bullish outcome. Thus, I can only conclude that the path of least resistance for this pick is higher, with targets ranging from $36.00 to $46.00 per share. Current support sits at the $29.00 level. If shares were to trade below that price, it would be reason for concern.
