Well, well, it was totally predictable that as earnings season wound down, there would be less and less reasons to hold on to stocks purchased in anticipation of ever-better news.
As the risks began tilting toward the downside, first there was noticeable erosion in price, and now, between the change in pose of the FOMC and Cisco's earnings as excuses to press the sell button, we are about to see if a major top is in place in the broad stock indices.
I thank goodness everyday that we trade on technicals. Imagine what an investor would do, when faced with the tale of two newspapers?
(WSJ.com) - Cisco reported its strongest revenue growth in three years, as sales surged 15% to $5.4 billion in its fiscal second quarter. But the computer-networking equipment company said the rebound in technology spending remains tentative.
NEW YORK (Reuters) - U.S. stocks were poised to fall at the open on Wednesday after a disappointing earnings report from technology bellwether Cisco Systems Inc. cast a pall over the market.
"It's going to open down hard," said Tom Schrader, managing director of U.S. equity trading at Legg Mason Wood Walker. "I think it's primarily due to Cisco. It's got the Nasdaq world shaken."
Cisco, the world's largest maker of equipment that directs Internet traffic, posted a lower quarterly profit after an accounting charge after the closing bell on Tuesday, but it said sales rose more than expected as corporate customers boosted technology spending.
Lower markets in Europe and overnight in Japan were also cause for concern, Schrader said.
"To me, a lot of signals are going off," he said. "It's probably not a bad time to head to the exits."
Chartwise, as far as CSCO is concerned, it already gave warning when it failed on the test of top on January 27, and now, on the big dip to the 50-day MA below, we'll see what happens.
This is what we had to say along the way:
(January 26) - CSCO closed the gap, and now, we can peg resistance at 28.34, the point of breakdown from last Friday. It's still trading above the 20-day EMA, so we'll see if one last group of buyers come in for this one.
(January 27) - Yesterday, we identified CSCO, ORCL, ATML and QCOM as buy setups on a swing trade basis.
If you are long any of these stocks, your stop loss should be moved up to an area around yesterday's low as we see if these can go up one more day today.
Again, the initial upside target is a test of the swing high where the pullback started, but there is no guarantee that it can actually get there. If you own it now, you're interested in defending against a lower high that forms on a test of top that is followed by a reversal to the downside.
That's all you have to do today -- ensure that your capital is protected, and be on the lookout for an elegant exit.
04.02.04 08:23 #