So let's start with Cisco. As mentioned in yesterday's post, I thought it a bit premature to start buying CSCO so soon after their recent hit to guidance, and while I've been correct with that call, I certainly wasn't correct with respect to the 2010 lows at $19.82 providing support. That proverbial "line in the sand" as I'd called it, washed away with a continuing incoming tide of sellers. Here's how we look intra-day. This and all charts are clickable for an expanded view.
And in the following Cisco chart, on a 5 minute scale, you'll see exactly how long support lasted - about 45 minutes, and then the beating commenced with earnest.
So what's next? Clearly at this point, my call from yesterday is no longer in play, as we will need to wait and see where Cisco bottoms out before getting on board. I do think that Cisco is a solid company with solid earnings, so it is reasonable to expect that the stock will return to the mid 20's in the not too distant future, but I would prefer to wait for a reversal signal before buying. Below I've put up a daily chart that goes all the way back to July 2009, where we have a gap fill around 18.94. This, plus the psychological whole number level at 19.00 should provide the next real support, should the stock continue to fall.
One final note on Cisco before moving on. Yesterday I highlighted the high volume selling as one of the main reasons why I wasn't prepared to start buying it yet. That trend continues today...remember I told you that the 50 day average volume for Cisco shares traded is ~67 million? Well as of 12:15 today, there has already been 107 million shares traded, so we can expect that by day's end, we will likely be at double the 50 day average (or more) once again. That truly is a tide of sellers!
Now on to the Euro. Yesterday I posted twice on this, and so far, so good, as continued selling pressure resulting from deteriorating sovereign conditions in Europe are causing the Euro to get clubbed like a baby seal this morning, and sending price down towards my take profit target area, as shown below.
Above is the daily chart, and below, I've changed the scale to 30 minutes, to illustrate a point that I made yesterday. I commented that the Euro bulls seemed to be defending the intermediate low that had been made on Friday at $1.3572, but that once we broke through this level, we would likely see 1.3500 and below pretty quickly. This chart shows exactly what I was talking about...as you can see going from left to right along the horizontal line, the green arrows show where the bulls fought back the selling pressure, defending the general area right around 1.3572...pushing price back up on 5 separate occasions. The interesting part is, once the bulls give up a line of defense, price will usually fall very rapidly. This has nothing to do with SingleMalt being prescient, it is simply a market dynamic that you will see in trading time and time again, whether it be in currencies, stocks or commodities.
As you can see above, "pretty quickly" in this case meant 90 minutes, which is about how long it took for price to hit $1.3500, once support at 1.3572 collapsed. Since I began typing this post, I've kept an eye on the Euro as the bulls have tried to defend $1.3500, but at the moment, they're losing the fight, as the current level is 1.3487 and dropping. My take profit target was initially 1.3475, a 300 pip winner, which I may be able to take here within the next 30 minutes, but if this brutal clubbing continues at the pace it's going, I may need to let it ride a bit longer.
All for now....
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