CISCO SYSTEMS (CSCO) -  November 22, 2023

SIACharts relative strength analysis tools not only help investors to avoid stocks with weakening relative strength and at risk of short-term losses, but also to identify stocks with the potential to underperform over the longer term.

Networking hardware giant Cisco Systems (CSCO) can be seen as an example of both short-term (green and yellow arrows) and long-term (black arrow) trend analysis.

Cisco had trended upward within the SIA S&P 100 Index Report from August of 2022 through to October of 2023 but never reached the Favored zone. In the last month, starting before disappointing earnings came out last week, the shares rolled over and started to fall back within the yellow zone, eventually dropping back down into the Unfavored zone this week. In the last week, CSCO has lost 9.6% of its value and has fallen 36 positions in the report to 72nd place.

Cisco Systems dropped out of the Favored zone on August 15, 2019 at $46.25, and has not been back there since. Over four plus years stuck in the wilderness, CSCO has gained a paltry 3.3% to yesterday’s close of $47.80. During the same time frame, the S&P 100 Index has climbed 68.3%.

A major breakdown is underway in Cisco

shares. A summer rally peaked in early September and since then, the shares had been faltering, staging a breakaway gap downward, establishing a new downtrend and failing to get back above its 50-day average after falling below it.

Last week, the shares staged a big gap down on a big spike in volume as investors reacted negatively to the company’s latest earnings report. This move snapped an uptrend line and confirmed the start of a new downtrend. Since then, the shares have been trading in the $46.00 to $48.00 range.

Initial upside resistance appears in the $50.00 to $53.00 area where a round number, the 50 and 200-day moving averages and the top of the recent gap cluster. Potential downside support appears at a previous low near $45.50, then previous lows and a round number in the $39.00 to $40.00 area.

This 1% chart highlights how Cisco Systems (CSCO) shares have dropped off a cliff over the past two months. The shares had staged a big rally between May and August. Since the beginning of September, however, CSCO has been under distribution, falling from near $57.80 back toward $47.50 without even so much as a 3-box (3-4%) bounce along the way. Currently on a bearish Double Bottom signal, next potential downside support for CSCO appears in the $44.60 to $45.05 area where a previous low, a horizontal count, and a 45-degree uptrend line cluster. Previous lows then suggest further downside tests may appear near $42.45, $39.60, or $38.05 on trend. Initial resistance on a bounce may emerge between $49.80 based on a 3-box reversal and a retest of a recent breakdown point, and the $50.00 round number.

With a bearish SMAX score of 5, CSCO is exhibiting weakness across the asset classes.