CSCO Stock: This Competitor is Outperforming
The amount of data we now consume is outrageous. And how do I know this? Because I just went over the limit of my data plan; a plan that I thought I had absolutely no chance of fully consuming. As a result, I have now become a conscious data consumer and I try to use Wi-Fi as much as I possibly can. As data usage is on the rise, router and Internet infrastructure product-makers like Cisco Systems, Inc. (NASDAQ:CSCO) stock are set to flourish as they are the leader in this space. Cisco stock is hitting new 52-week highs as a result.
My biggest issue with purchasing CSCO stock as investment is that it currently has a market capitalization of $156.0 billion. My hopes of achieving the American dream using Cisco stock as a vehicle is slim to none, unless CSCO becomes the largest company in the world by market cap, which is always a possibility but unlikely. A name I like with a much smaller market cap is NetGear, Inc. (NASDAQ: NTGR) stock.
Is This the Next CSCO Stock?
NetGear stock has a teeny-tiny market cap of $1.86 billion, compared to Cisco stocks’ $156.0-billion market cap. I can easily see this name trade much higher and not be concerned with valuation. It’s not just the market cap that is compelling; the chart is extraordinary, as illustrated below.
Chart courtesy of StockCharts.com
NTGR stock spent four years from 2011–2015 creating an extremely large symmetrical triangle. Symmetrical triangles are a consolidation pattern that is defined by two converging trend lines. The price bounces off each support and resistance level, and momentum is being built. For this reason, these patterns act like coils. Momentum is built until one of the support or resistance lines is broken and then shares are left free to surge.
In a symbolic way, this pattern describes two camps: one bullish and one bearish, fighting for dominance. As the trend progresses, the battle-line that separates the two camps draws closer. Each camp is respectively building a position and holding the line. A breakout would cause one camp to cover or exit their respective position. This action acts as fuel as a substantive run in the share price follows.
The reason I am so enamored with this chart is its sheer size and duration. That is a massive triangle. Large patterns of this duration are usually accompanied by explosive exponential outcomes.
The following chart illustrates this outcome.
Chart courtesy of StockCharts.com
On October 23, 2015, NTGR shares gapped higher, breaking out of the triangle pattern. Breakaway gaps signal that a new trend is underway and rarely ever get filled. NTGR stock was up 28% on that day. This is the explosive exponential outcome I was referring to, and this was only the beginning of the new trend that has developed.
In February, NTGR stock back-tested the symmetrical triangle, as it is not uncommon for shares to trade back and test a previous level of resistance. Shares have taken off since, sitting at $56.84 and up 35% in the year.
This is a compelling name that I would be watching out for an opportunity to acquire shares on weakness. A drop to $46.00 would present such an opportunity.
More Upside Than Cisco Stock? Maybe
CSCO stock is not the only play in the router and Internet infrastructure arena. There are companies such as NetGear that offer similar exposure but with better potential that only a small-cap stock can offer. NTGR stock has surged this fiscal year and I would use any pullbacks to $46.00 as a buying opportunity.
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