Cisco (CSCO) surprised the market with great earnings and it’s up in after hour trading. Here’s your trade for tomorrow. (November 14, 2018)
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I want to talk about Cisco ( NASDAQ: CSCO ) today. They reported numbers right after the bell and they beat expectations. You can see how the stock initially took a big move up after closing down. It took a big move up and now it is just kind of drifting slightly above where it closed, you can see this here.
Here’s the thing that I want to mention, what do you do tomorrow? In my view, the last thing you want to do is buy Cisco ( NASDAQ: CSCO ), unless you happen to short it up here. This stock has been on a heck of a downturn for the last four days. Big down days, four in a row, closing near the low of the day every time.
Now that the stock is up what are we going to do? If there was real buying behind this the stock should be up more than it is. I look at this, tomorrow, as a potential, I can’t say for sure because I can’t predict the future I can just look at dynamics, as a potential opportunity to short this stock. And this is why: One, two, basically three here, and now four tries at the 200-day moving average and the stock didn’t fall below that level; it did briefly here but I’m not talking about that, I am talking about just generally speaking.
Tomorrow if the stock opens up where it is now, tomorrow is going to be it. You are going to see a lot of selling from all these folks who owned the stock all the way down here, bought it all the way down here. They figure I’ll hold it over earnings and that will get me out. And then all the stock does is recover up to here. I think you are going to see a lot of sellers come in to take advantage of any buying that there is on this stock.
I would be selling into that. I can’t say, again, in real time, whether this is a short. But I will tell you this if the stock gaps up and then starts trading down BELOW where it opened at I think you can short that stock. Maybe put a 1.5 percent stop on it. Keep a real tight stop on it. But again, if it starts trading below where it opens tomorrow, that’s when you short the stock. And then if the stock starts falling below today’s intraday low of 44.08 then I would add to that short and then just let it work.
The thing that you have got to understand about short selling is, particularly in this volatile environment right now, you don’t want to ask too much from your shorts. You don’t want to hold these things for too long, in my view anyway. If you are a big money manager and you have got a real commitment against a particular stock, you are going to hold it through all these little jigs here, I’m just talking about trading.
I am talking about waiting for the stock to do what it does tomorrow. As long as it, I’ve got to say it again because it is really important that you understand this, as long as the stock starts trading tomorrow BELOW where it opens up that’s when you short the stock with a pretty tight buy stop on it. If it gaps up and then continues to move higher, well then this would not be a short, would it? Think about what is actually happening, rebound off the 200, rebound off the 200, rebound off the 200 and a rebound off the 200. So it would be another one of those.
All I am saying is, that at some point these little rebounds are going to fail and the stock is ultimately going to do this. That’s what I am looking for, for tomorrow. I am not predicting it I am looking for it. Now you know what the trigger is going to be. Again, a trade down BELOW where it opens up tomorrow.
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