DailyPlay – Cisco Systems Inc (CSCO) – January 10th, 2022

Bullish – CSCO – $62.13

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Market Outlook:

A volatile week saw the S&P 500 as well as the Nasdaq-100 end the week in the red. Both indices broke below their respective key levels which indicates further declines ahead for this week. However, the VIX has declined for 2 sessions in a row despite declines in the major indices. This can sometimes be used as a short-term bullish signal as the bearish move is displaying signs of slowing momentum – a move lower in the major indices and a move lower in the VIX can act as a reversal signal. However, we view the overall macro picture as slightly negative for equities as markets continue to price in an additional rate hike for 2022 despite Friday’s low non-farm payroll number. We expect another volatile week as inflation numbers are released and continue to be a key theme in markets. 

CSCO Bullish Trade Idea:
Our bullish trade today is the Cisco Systems Inc (CSCO). CSCO’s strategy in transitioning to a higher-margin services type business is continuing to pay off. From a technical perspective, CSCO recently broke above the $60 resistance level with strong momentum and has pulled back to this level to provide a better risk/reward bullish entry. On a relative basis, CSCO is starting to outperform the communications sector which it is highly exposed to as well as the technology sector. 

As this is a long call vertical spread, look to take profits at 75%-100% gain and cut losses at 50%:

  • Take Profits: $5.10 – $5.82 Credit
  • ​Stop Loss: $1.46 Credit

View CSCO Trade

Market Observations

  • ROK – Strong retracement from ATH levels towards at $327 levels, a break lower could indicate further downside
  • GE – Following recovery from a lower price, GE broke above resistance at $100 while gaining strength. Further upside can be expected if this level holds as support
  • TXN – A strong decrease in strength drove TXN to break below support at $183, if price is maintained below this level further downside could be expected

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Tony Zhang