Weekly Technical Analysis of Cisco (CSCO)

We've been exploring how volume and candlesticks on a weekly chart can reveal market momentum.  Today, we're going to shift our focus to individual stocks... some of which I've chosen and some you've submitted.

An anonymous reader recently submitted Cisco (CSCO) for a weekly technical analysis using the principles we've been exploring.  If you haven't been following along, please go back and review the past few weeks of articles on Fundamental and Technical analysis.  It's critical you understand the big picture before narrowing your focus onto specific stocks.

So, without further delay, let's take a peak at the weekly chart since January 2009 for Cisco.  So, we'll begin with the acknowledgement that we are in a downtrend at the end of 2008 and, therefore, we're looking for uptrend indicators.  Here's the chart... see if you can spot them based on the principles we've been exploring over the past few weeks.

Weekly Technical Analysis of Individual Stocks

Coincidentally, an anonymous reader recently responded to my invitation to have a specific stock analyzed, using the weekly technical analysis principles demonstrated using the market charts in recent weeks, by submitting Cisco (CSCO).  I had already planned on doing a stock screen (which was posted on September 6, 2010) which is more of a summary of a stock's potential than a technical recommendation... so I thought I might as well use CSCO as my first example for using volume and candlesticks to help predict a stock's movement.

A few principles first:

• First, please review this article which outlines the principles we'll be building on as we now narrow our focus from the overall markets to a specific stock.   If you do not have a grasp of how volume and candlesticks reveal market momentum, please do not try to use it for individual stocks.  Instead, let me know what you're struggling with and I'll take the time to demonstrate it further for you.
• Second, investors need to remember that an individual stock is more volatile than an overall market.  In other words, you've eliminated much of the "diversity" of your investment.  Therefore, investors need to look at the following factors which will always impact a stock's momentum:
• Sector - I find my method works extremely well with most sectors; however, if it is going to challenge me, it will do so with resource and commodity stocks (gold, oil, copper, etc.).  Therefore, we need to apply a few more questions to our momentum tests.
• News - Stocks are very susceptible to news... for good and for bad.  Just think about all the ways news can throw stocks into immediate volatility... buy out rumors, broken down equipment (or rigs exploding), similar sector companies in trouble or in buy out talks, world events (political), world economic reports (China will or will not do such and such)... and the list is endless.  Therefore, it is more important than ever with individual stocks to use stop losses.  I've written extensively on this in the past, so I won't repeat it now... but you can look here for just a little of what I've said previously. 
• Market Momentum - I hope that if I keep saying this, it will eventually become your mantra.  When a market is going up, approximately 80% of stocks go up too... and when it falls, approximately 90% fall too... so to be a successful investor, you need to understand the market's overall momentum.  That is why I started there during the previous few weeks and why I think it is so important to understand prior to moving on to individual stocks.  Furthermore, it is also why I have a market momentum indicator at the top right side of my website... it's always there and it's always updated based on the short to mid-term trends.  So, before I trade on weekly momentum with an individual stock, I always compare it to what the overall market momentum is... if the market is shifting downward, I will likely take some profits earlier than if the stock showed signs of downward pressure in an upward trending market.  Make sense?
• Third, I have discovered there is one time when my strategy does not work well... so pay heed.  What I will show you in the next few weeks should not be used with small cap stocks or low volume stocks.  I'll eventually show you some strategies for these, but for now, please recognize I am not advocating you use the momentum indicators for such stocks.  They are too volatile, too risky, too emotional, and too illiquid to produce consistent results.

Well, I suppose that took a little longer than you or I expected... so, join me tomorrow for a look at CSCO based on weekly momentum.  I'll show you specifically where it is today and when I would have sold or bought this stock in recent months and years based on the weekly momentum indicators I've outlined for you.  Then I'll go to one of my favorites before looking at one Valerie requested.  I think you'll find it fascinating and see that much of the guesswork can be taken out of timing when you should buy or sell a stock.  I know if you apply this knowledge to your trading, you'll be able to make money on the markets every morning.

In the meantime, if you have a specific stock you'd like analyzed based on its weekly momentum,

just let me know... 

leave a comment with one or two and I'll take a look at them in the next few weeks with you.

Stock Screen for CSCO (Cisco)

You've probably already bought their products...
Now it's time to consider buying their stock!

Cisco Systems Inc.'s website is quite flashy... and there's more information there than you really need to know in order to make an investment decision.  So, let me save you some time and provide you with some of the highlights and cautions.  

Cisco is a world leader in manufacturing switches, routers and other networking and communications hardware for business and personal use.  In fact, when my router recently transmitted its last signal, I found myself staring at various router options, most of which had the name "Cisco" on the outside of the box (thus my inquiry of this stock).

Technical Analysis of Individual Stocks

For the past several weeks, we've focused on "fundamental" and "technical" analysis tools and techniques. I've shared with you several ways you can spend a few minutes each day or an hour on the weekend and still be a successful trader.  Weekend investors are not at a disadvantage if they know what to look for and how to use the tools!

That's why I've pointed you to the most important fundamental and technical indicators to understand stocks and the markets.  It's essential to understand the big picture (overall market momentum and movement) prior to diving into individual stocks.  So, if you're there... this week, we'll delve into some individual stocks and look at how we can tell the long-term momentum.

If you have specific stocks you'd like me to analyze for you, please submit them here by leaving a comment or send me an email.  The more specific you are, the better I'll be able to help you.  Otherwise, I'll be choosing a few of my favorite big names for you to look at with me.