Cisco may finally extend meaningfully beyond prior highs, based on latest chart action
Cisco (CSCO) has been around for a while, going public back in 1990. Its popularity soared during the dot-com bubble, and it became infamous for the complete and utter crash that followed. Hundreds of the tech leaders from a quarter century ago are no longer around today. Others have stood the test of time, such as Apple (AAPL) , Amazon (AMZN) , and IBM . CSCO is still here too, but its name doesn’t exactly resonate alongside the Nvidias of the world now. Why? For context, AAPL, AMZN, and IBM cleared their former 2000 highs in 2004, 2009, and 2010, respectively. CSCO only just overtook its 2000 peak in February. Not many people realize this simply because it has taken so long to actually come back. Maybe they should. Let’s look at the short-term chart. We first presented this to CappThesis clients as a trade idea two days ago, when the stock was still building a bullish pattern. CSCO has been gradually recovering from its earnings-related gap down in February. While that may have pushed it off many traders’ radar screens, the ensuing pattern has taken shape as a potential cup and handle formation. As always, we wanted to buy the breakout, which occurred on Tuesday. As the stock pushed above the trading range, it triggered a modest target near $86.60. A move into that zone has now pulled the stock back into the prior gap. This often sparks momentum buying, which could happen again as investors look for a return toward its former highs. Waiting for confirmation that positive momentum is returning — both at the stock level and across the market — has helped avoid premature entries that could have turned into losses in chart trade ideas we’ve shared this month. Taking the same approach with CSCO, we also have some leeway given it doesn’t report again until May. Between now and then, we’ll see if this pattern plays out. Given its slow comeback since 2002, CSCO clearly has underperformed the Nasdaq 100 (NDX) for a long period. Thus, it will take some time to make a dent in the longer-term relative trend. The first step, therefore, is to leverage the bullish formation seen on the CSCO/NDX chart below. While there have been periods of outperformance, they have been short-lived. The stock now has another chance to make up some ground versus the NDX, especially given how well it has performed in recent weeks while many of its counterparts have struggled. So what are the odds that Cisco can actually extend materially beyond its 2000 peak at this point? Looking at another version of the very long-term chart, now with percentage moves included, we can add some important context. From the October 2002 low, Cisco is up roughly 1,000%, which is certainly eye-catching — but less so when compared to the move before the dot-com crash. From the July 1994 low to the March 2000 peak, the stock surged about 1,600% in under six years. That kind of move was clearly unsustainable. By contrast, the current 1,000% advance has unfolded over roughly 23.5 years, a far more measured and believable pace — especially considering it followed a nearly 90% drawdown. This is why we analyze multiple time frames. Cisco has finally reached new all-time highs, but the path higher has been gradual and orderly, not excessive. If the stock can continue to take this one step at a time — holding recent gains, leveraging the short-term bullish formation and continuing to trend higher — then a more meaningful extension beyond prior highs becomes increasingly plausible. From there, the bigger shift would be a sustained move toward relative outperformance vs. the NDX, something that has been elusive for much of the past two decades. DISCLOSURES: None. All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, or its parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL’S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.