Market Overview

Trading Cisco


Shares of Cisco Systems (NASDAQ: CSCO) are falling today, currently off 4.46% to $25.54. Shares are off despite a fantastic earnings report from the company. John Chambers was said to have given lackluster guidance, but frankly it sounded bullish to me. Their revenue growth across the board, cash glow, profit growth, and growth prospects all look bright and spin bullishness around the stock.

I believe that this is a company that will continue to beat estimates for at least the next four quarters and, although the rise could be slow and steady, will continue to gain market share. The stock should not be selling off today, it seems to be hedge fund profit taking after cherry-picking the stock during the ‘flash crash.”

The volume on CSCO is running at over 100 million shares today; average volume is usually 62 million shares. The stock has only traded over 100 million shares 3 times in the last 200 trading days, every time the stock has formed a high-volume bottom or top.

Implied volatility in the name has come off the highs pre-earning, but is still elevated at 34%.

I believe that you should buy shares here and hedge that by buying the June $25/24 put spread for $0.30. This gets you long at a high-volume bottom, while still having downside protection in the name and mitigating pumped up volatility.


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Posted-In: Earnings Long Ideas Guidance Hedge Funds Technicals Options Movers Trading Ideas

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