Analyzing the Cisco Systems (CSCO) chart

Over the past 12 months Cisco Systems Inc (CSCO) shares have traded between $13.30 and its 52-week high of $24.60. Believe it or not but the sleepy old company is now trading over $16.60 a share.

Cisco is a company we have talked up to death here on the Masters and now shares are now trading just 3 points off of the 52 week low.

It seems that the bounce play is inevitible. Let's take a look at the chart to make sure

Note the green arrows in the chart. These denote the price crossing the 50 day MA. In the past year, every time the stock has crossed over it's 50 day moving average, shares have spiked - followed by a sharep sell-off. This was more prenounced in the first 2 occurences in the chart.

Here's where it gets interesting, on the 4th green arrow, shares sold off as usual but had a big spike in buy volume at the bottom. I believe this calls the bottom of CSCO.

The final green arrow is where we are right now; CSCO has crossed over the 50 & 150 day MA's. Also, the lines seem to be smoothing out at the bottom here and pointing up.

Mastery Bottom Line:

It is often thought that a stock that has a price trading above its 50 day moving average and if the 50 day moving average is above the 200 day moving average, then the stock is healthy and should continue upwards in the near future.

This is what we want to happen in the CSCO chart for confirmation.. The 50 day must cross the 200 day average to confirm the bullish trend.

As I pointed out earlier, historically there have been a lot of head fakes with CSCO. Each time the price has crossed the 50 day MA in the last year, investors were rewarded by a few points, followed by a massive selloff.

With the current trend in tech, I think it would be fine to scale into a position in CSCO right now, but watch out for the downturn if the 50 doesn't cross the 200.