Short Trade Idea
Enter your short position between $80.06 (the lower band of its horizontal resistance zone) and $83.25 (the intra-day high of its last bullish candlestick).
Market Index Analysis
- Cisco Systems (CSCO) is a member of the NASDAQ 100, the Dow Jones Industrial Average, the S&P 100, and the S&P 500 indices.
- All four indices trade in bearish chart patterns with rising bearish trading volumes.
- The Bull Bear Power Indicator of the NASDAQ 100 is bearish with a descending trendline.
Market Sentiment Analysis
Equity markets extended their slide amid heavy selling in software stocks and a general rotation out of tech. AMD shares plunged despite delivering better-than-expected results, but the outlook disappointed. Alphabet reported solid earnings and massive capital expenditures, transforming itself from an AI laggard to an AI leader. Qualcomm shares tumbled after the company issued a weak outlook. The ADP employment report delivered another worse-than-expected reading on the labor market. Amazon’s earnings are in focus today and could set the tone for markets.
Cisco Systems Fundamental Analysis
Cisco Systems is a technology company known for its networking, security, software, and cloud computing solutions. It has also faced allegations of collaborating with the NSA’s Tailored Access Operations (TAO) unit to intercept network gear.
So, why am I bearish on CSCO ahead of its earnings release?
AI demand will drive infrastructure investments, and despite minor trust issues, Cisco Systems should capitalize on this. Still, I cannot ignore the declining operating and profit margins. Its long-term debt is also rising, and single-digit earnings-per-share growth expectations do not support the recent rally. Over the past month, the consensus earnings estimate has been decreasing, and increased competition is likely to challenge CSCO’s market position, leading to the loss of data center business to industry peers.
Metric | Value | Verdict |
P/E Ratio | 32.08 | Bearish |
P/B Ratio | 7.01 | Bearish |
PEG Ratio | 1.63 | Bullish |
Current Ratio | 0.87 | Bearish |
ROIC-WACC Ratio | Positive | Bullish |
The price-to-earnings (P/E) ratio of 32.08 makes CSCO an expensive stock in its industry, but reasonably priced compared to the NASDAQ 100. By comparison, the P/E ratio for the NASDAQ 100 is 34.20.
The average analyst price target for CSCO is $86.95. This suggests there is limited upside potential, but downside risks are accumulating.
Cisco Systems Technical Analysis
Today’s CSCO Signal
- The CSCO D1 chart shows a price action inside its horizontal resistance zone.
- It also shows price action between its ascending 0.0% and 38.2% Fibonacci Retracement Fan levels.
- The Bull Bear Power Indicator is bullish with a negative divergence.
- Trading volumes are higher during selloffs than during rallies.
- CSCO advanced as the NASDAQ 100 Index corrected, a bullish confirmation, but bearish catalysts are rising.
My CSCO Short Stock Trade
- CSCO Entry Level: Between $80.06 and $83.25
- CSCO Take Profit: Between $62.92 and $65.75
- CSCO Stop Loss: Between $87.82 and $89.58
- Risk/Reward Ratio: 2.21
Ready to trade our analysis of Cisco Systems? Here is our list of the best stock brokers worth reviewing.