Two Cisco Charts This Expert Is Looking At, Pre-Earnings

Eagle Bay Capital founder JC Parets tracks the performance of the Dow Thirty, and recently analyzed Cisco Systems, Inc. CSCO’s stock.

Below are two charts to see before the company’s earnings report on Wednesday afternoon.

Weekly Chart

According to Parets, Cisco is a great trade. Structurally, the stock broke out attractively above the key resistance that Eagle Bay has been mentioning over the past several months.

The firm still wants to stay long Cisco only above the upper of the two converging trendlines, and more precisely, above last summer's highs.

Related Link: Cisco Earnings Preview: Will Strong Execution Drive Results?

“Momentum is still in a bullish range, however relative strength is still stuck in this multi-year range, but price is what pays,” the report explains. “Risk managment-wise, anything back into this range and we've been happy to go back to neutral.”

The firm’s target just above $30, “which represents the 161.8% Fibonacci extension from the 2nd half of 2013 correction,” was reached in March. Now, the pros are waiting for more data and approach this more tactically.

Daily Chart

Short-term prices surged substantially in November, “breaking out above the July highs with momentum hitting overbought conditions.”

The firm has preferred to approach Cisco from a structural perspective, and still only wants to buy on drops –- always above the July highs.

In late December, the stock hit Eagle Bay’s near-term target around $28.30, which represents the 161.8 percent Fibonacci extension from the correction that started this summer.

Parets has wanted to buy dips close to $26, and the stock got there in early February.

“At this point I still would only want to be long if prices are above 28.30. Below that and I would not want to be in this name based on that bearish divergence in momentum. If we are able to stay above that level we have a target just under 32 based on the 261.8% FIbonacci extension of the July/October rally," he concluded.