Squashed Amazon Rumors Boost Cisco Systems Stock

CSCO stock recently flashed a reliable buy signal

Jul 19, 2018 at 10:03 AM
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The shares of Cisco Systems, Inc. (NASDAQ:CSCO) are trading up 1.6% at $42.82, after a top cloud-computing executive at Amazon (AMZN) said the company's Amazon Web Services (AWS) will not begin selling network switches. The initial AMZN rumors sent several tech stocks tumbling last week.

In fact, that Amazon-related pullback likely created a buying opportunity in CSCO stock, considering it brought the shares to within one standard deviation of their 200-day moving average. According to Schaeffer's Senior Quantitative Analyst Rocky White, in the three most recent times the stock has pulled back to this trendline after a lengthy stretch above it, Cisco has averaged a one-month gain of 4.05%, with 100% of those returns positive.

Plus, the Dow stock is holding firmly above its +10% year-to-date return level at $42.13 -- and those wanting to bet on a bigger bounce from here may want to consider using options. CSCO's Schaeffer's Volatility Index (SVI) of 25% ranks in the 28th annual percentile, indicating short-term options are pricing in relatively low volatility expectations at the moment.

Today, options traders are targeting the front-month July 43 call -- the most active Cisco contract in early trading -- and it looks like new positions are being purchased here for a volume-weighted average price of $0.19. If this is the case, breakeven for the call buyers at tomorrow's close is $43.19 (strike plus premium paid).


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