Cisco shares demonstrate correctional strengthening from the August 7-month low with an increase in value of more than 5.5%. Cisco is actively increasing its investment in M&A. In July, the company announced the acquisition of Acacia Communications for USD 2.6 billion to strengthen network solutions. In August, Cisco purchased Voicea private company, known for creating a voice assistant with artificial intelligence.
During the previous week Cisco shares grew by 3.32%. S&P 500 went up by 1.85% within the same period.
If the price consolidates above the resistance level of 49.00, one should expect the company’s shares to correct. Potential profits should be locked in by orders at 51.00, 52.50 and 54.00. Stop loss — 47.00.
If the price consolidates below 46.00, one may consider buying the company’s stock. The movement potential is aimed in the area of 43.00–41.00. Stop loss — 48.00.
Implementation time: 3 days.
|Take Profit||51.00, 52.50, 54.00|
|Stop Loss||48.35, 47.00|
|Key Levels||44.00, 46.00, 47.50, 49.00, 51.00, 54.00|
|Take Profit||43.00, 41.00|
|Key Levels||44.00, 46.00, 47.50, 49.00, 51.00, 54.00|
Support and resistance
Shares of the company consolidated after a significant drop over the past month. Currently the emitter is consolidating. No single direction tendencies are observed. Local support and resistance levels are 47.50 and 49.00 respectively. #CSCO quotes have the potential for resumption. Indicators show contradictory signals: the price consolidated below MA (50) and MA (200), and MACD shows positive dynamics. Positions are to be opened from key levels.
Comparing company’s multiplier with its competitors, we can say that #CSCO shares are undervalued.
Resistance levels: 49.00, 51.00, 54.00.
Support levels: 47.50, 46.00, 44.00.
Early Trading Review
The European currency showed ambiguous dynamics against the US dollar on Friday, closing with a minimal advantage of the “bears”. On Friday, investors focused on statistics from Europe and the USA, which failed to meet all expectations. German Industrial Production in July showed a decline of 0.6% MoM after a decline of 1.1% MoM last month. Analysts had expected growth rate at 0.4% MoM. EU GDP for Q2 2019 slowed down from +1.3% YoY to +1.2% YoY, which turned out to be slightly better than market expectations of +1.1% YoY. On a quarterly basis, the euro area’s economy remained unchanged at +0.2% QoQ. The American report on the labor market indicated an increase in Nonfarm Payrolls in August by 130K, which was noticeably worse than forecasts of 157K. Average Hourly Earnings also slowed down in annual terms from +3.3% YoY to +3.2% YoY with a forecast of +3.1% YoY.
The British pound closed last week with a slight decrease against the US currency, retreating from local highs updated on July 29. The downward movement of the instrument was associated with a number of technical factors. Investors fixed their long profit before the publication of the August report on the US labor market, which turned out to be contradictory. Moderate support for the pound is still provided by the decision of the UK Parliament to block a No-deal Brexit. Also, investors are frightened by the growth of political uncertainty. The Parliament will have a summer recess prolonged until mid-October, and Boris Johnson, apparently, will have to agree with the EU on a new postponement until January 31, 2020. Today, the market expects the publication of macroeconomic statistics from the UK on the dynamics of industrial production for July and economic growth in July/August.
The Australian dollar showed strong growth against the US currency last week, updating local highs of August 1. The instrument was supported on Friday by not the most successful report on the US labor market for August. Nonfarm Payrolls in August amounted to 130K against the previous result of 159K and the forecast of 157K. The Unemployment Rate in August remained at the previous level of 3.7%, while the Average Hourly Earnings accelerated in August from +0.3% MoM to +0.4% MoM, which turned out to be better than the forecast of +0.3 % MoM. During today’s Asian session, the pair is trading with a raise. The Australian dollar is moderately supported by data on Home Loans in Australia. In July, the volume of loans extended by 5.0% MoM after a decline of 0.8% MoM last month.
The US dollar returned to flat dynamics against the Japanese yen last Friday. Trading was multidirectional due to ambiguous macroeconomic statistics from the United States and Japan. In July, Household Spending in Japan slowed down from +2.7% YoY to +0.8% YoY, which turned out to be weaker than the forecast of +0.9% YoY. Overall wage income of employees in July reached negative values of –0.3% YoY after rising by 0.4% YoY in June. During today’s Asian session, the pair is trading with a slight growth. Investors are focused on statistics from Japan. Japan’s GDP for Q2 2019 slowed down from +0.4% QoQ to +0.3% QoQ, which coincided with the forecasts. In annual terms, the Japanese economy slowed down from +1.8% YoY to +1.3% YoY, which also came as no surprise.
Oil prices rose on Friday, despite the fact that during the day, they traded mainly with a decrease. Quotes were still supported by a US Department of Energy report published on Thursday that indicated a 4.8M barrels reduction in crude oil inventories to its lowest level since October 2018. The US labor market report published on Friday put pressure on the dollar, because it was worse than expected. Investors fear that weak macroeconomic statistics will put additional pressure on the Fed, which will lead to a more active reduction in the interest rate at the September meeting of the regulator. So far, the most likely scenario is a 0.25 point cut in rates.