Cisco Systems, Inc. Off Its Highs And Failing To Show Any Real Fight

Cisco Systems, Inc. CSCO has long been the go-to gauge of health for the networking and audio/visual sectors of the telecommunication world.

After a simply dismal performance in 2013, the company's shares rallied nearly 30 percent during 2014 and had the bulls seeing life through rose-colored glasses once again. Since the July peak, however, the stock has been in the midst of what the bulls are hoping is an “abc” downside correction.

So, is this just a correction or something more serious on the downside?

What The Bulls Are Seeing…

In the bulls' eyes, Cisco is a great value based on price-to-book and price-to-sales multiples of 2.26 and 2.72, respectively, not to mention its PE ratio of more than 10. They also love the nice profit margins, strong cash flows and a very strong balance sheet that Cisco continues to sport.

Related Link: Microsoft Leading The Trend Higher In The Markets: How Much More Can We Expect?

Technically, the bulls have little to be excited about at today's prices. However, they will get more aggressive with their buys if and when the stock falls to support at $23.33.

What The Bears Are Seeing…

Cisco's bearish contingent is spying a potential “c” leg of an “abc” downside correction just getting ready to commence. If they are right, the stock should move from $24.90 to $23.33 in the very short-term.

Besides the technical set-up, the bears are focused on the relatively low revenue and earnings growth estimates for the foreseeable future, which make their P/E of 10 not quite as “cheap.”

What The Technicians Are Seeing...

The technical analysts covering Cisco shares note the obvious potential for the “abc” downside correction to play out. They note, however, that once that correction runs its course, the stock should turn back to the upside for perhaps another move that would mirror the 2013 – 2014 rally.

Such a rally would take shares up to around $30. The technicians note that any close above $25.25 would negate their call for the “c” wave of the “abc” to play out.

Overall…

Cisco Systems looks like an intriguing long-side play, but only if and when it pulls back to the projected support of $23.33.

Disclosure: At the time of this writing, Tim Thielen had no position in the equities mentioned in this report.