Cisco Systems (
may have finally bottomed.
Actually, the shares bottomed more than a year ago at $12.90.
But the stock has been trapped between that low and $20.81 ever
since. In fact, it's stayed below $22 since late 2010.
However, a recent jump higher could be the start of a major rally
that could initially take the stock up to $25.
The $17 zone, as depicted by a blue line, has been an important
level this year, acting as both resistance and support.
Accordingly, it's been the price where short-term rallies tended
to start or fizzle.
This chart shows the price of
shares along with an important support area to
Because Cisco recently established support at $17, the stock
should continue to rise until that level is breached to the
downside. The shares have already climbed higher by more than 11%
since finding support at $17, which is a move
I didn't expect
earlier this year.
Normally, the strong resistance near $19 and $20.50 would keep me
from buying CSCO. However, the 11% burst higher in November
appeared after a positive earnings report. Rallies grounded in
positive financial data are often strong enough to plow through
Moreover, the stock is cheap, trading at less than 10 times 2013
EPS guidance. The shares yield around 3%, too. Value investors
and dividend fanatics should flock to CSCO, supporting higher
The $19 resistance level should crack and the stock should burst
quickly to $21. If $21 resistance breaks amid high volume, expect
the shares to rally by another 19% to the $25 level.
Equities mentioned in this article: CSCO
Positions held in companies mentioned above: