Cisco (CSCO) sure looks overbought, right? Well, maybe…and maybe not. (August 09, 2012)

by DAN CSCO 
Good evening Dan here at StockMarketMentor.com on August 9th. It’s a Thursday; since I’m not working tomorrow I’ve got to say, “TGIT”. So look, what are we going to do with Cisco ( $CSCO Cisco Systems, Inc. ) here? This is a stock; you know you might say, “Wow! What a huge massive run up that’s been,” but if we just look and see what the percentage has been, 14 percent, 15 percent in what? A couple of weeks, that’s a pretty big move, on a point basis not that much, but percentage 15 percent in a large cap Dow component stock. So if you’re long the stock what do you do? For me, what I would do? I’m assuming you didn’t buy it today, but you’ve held it for a while so you’ve got profits to protect; I’m looking at the 200 day moving average, that may be where supply would be, but if we look at the weekly chart you can see we’ve got this kind of zigzaggy pattern so it could very well be that Cisco ( $CSCO Cisco Systems, Inc. ) moves higher just to fulfill this pattern; if it does, great. If it doesn’t, how are we going to protect our profits? Let’s say you bought down here, I’ll typically recommended, I talk about a trailing stop based on the prior days and that would be this days intraday low which here is $17.48; so maybe you put a stop like five or ten cents below that level; but in this case, because the stocks going up so much, because the market is kind of due for a little bit of a correction, I think that you’re almost certain to get stopped out in the next week or so; I just can’t see Cisco ( $CSCO Cisco Systems, Inc. ) continuing to move higher; I would suggest, if you’re long the stock you don’t have to sell it all, but you may consider selling some of it. One thing that a lot of traders forget about is that you can manage your risk by other than just using stop losses, you can manage your risk by taking some off the table, by selling a partial position; you don’t have to be all in or all out and so if you already have a full position for example, then go ahead and full position, your definition is different than mine; but go ahead and take some profit off the table, take some off the table and then look to buy it back if this falls back say in the low sixteen’s; that’s what I would be doing because this is still really choppy and I don’t see any reason for Cisco ( $CSCO Cisco Systems, Inc. ), from $17.70, just to keep on going without some kind of a pause. Would I buy it on the pullback? Absolutely, I’m not blind, I see this kind of chart, but you can see here too sometimes these lows takes several weeks, here we’re just kind of starting, wait to buy it on pullbacks. Okay members, I’ve got a lot to discuss in the Strategy Session particularly in the energy names and some of our Buzin’ Dozen so I’ll see you over there.

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