With CSCO reporting earnings after the bell today, I thought it would be fun to take a look at its chart patterns on multiple timeframes.
Starting with the long-term chart from 1990 to present, CSCO exhibits a classic bullish ramp, from $13 in 1990 to the high $70s at the peak of the dot-com bubble in 2000. The 10 year line of support wasn't violated until the 2000 selloff, but it shows how significant violations of long term support can be. The selloff was brisk at first, but continued on a downtrend through most of 2002. The 2002 low at about $10 established the base of a new, low slope trading channel that continues to today (at about $15). Today, the top of the channel is in the high $30s, representing the realistic potential upside in this stock at present. Within the major channel, there are minor downsloping channels, which represent zones of support and resistance as the price moves within the major channel.
Zooming in in time to the last four years we can see the minor channels more precisely. Currently, the price is bumping up against the resistance of a channel top in the high $24 area. It will be interesting to see if the upcoming earnings event will provide the impetus for the price to pierce this resistance. If earnings are not well received, there is the potential to fall to the bottom of the channel at $20. Longer-term support is at about $16, with the excursion below that point in March of 2009 being unlikely to be repeated unless the markets experience another period of intense panic selling.
The 1-year chart shows the depths of the March selloff, followed by an ascending wedge channel. The base of this channel was recently violated, first on October 28, then again, with more conviction on October 30th. This opens up the possibility of a fall to short term support at 21 and longer term support at $20 (the bottom of the channel in the 4-year chart).
The 3-month chart shows the broken trendline in more detail, and a zone of very short term support at about $22.60. If this support fails, $21 is the next likely support. The short term high probability trading range for CSCO is between the support at $21 and the resistance of the broken trendline at about $24.40.
