Cisco Stinks Up The Market

Shares of Cisco Systems (CSCO) fell this morning nearly 20% after the networking giant reported 3rd quarter earning results after the bell Wednesday. Although the company posted a profit, analysts downgraded the stock on future revenue concerns.

Analyst Speak

UBS analyst Nikos Theodosopoulos sees Cisco undertaking a "major unexpected downward reset" as concerns rise from Cisco forecasting weaker sales from state and local governments. UBS continues to maintain a $25 target.

Translation:
By resetting, Wall Street can go out and screw investors for now who are in the stock and at some point it will go back up again. So it appears that existing shareholders will have to experience some pain as the stock weakens in the near term.

Volume Turnover

With a massive 5.6 billion share float, a change of hands is likely in order. As I write this just 1 hour into the session, over 230 million shares have fleeted leaving for quite an interesting road for the stock ahead. Why? Because of the lack of volume. Cisco over the past 3 months has traded on average 57 million shares which is anemic considering that is only 1% of its float.

Do a little math and you will see that it takes 100 days for it to turnover in full. Now of course, days like this will result in a high volume but you should start counting from here on out the daily volume. Remember that there are 22 days of trading in each month so a good 4 months is the normal trading cycle of Cisco's volume.

Cisco Chart Analysis

CSCO will attempt to hold the $20 support level that it created back in August. The next support level is around $18. Overhead resistance is now $24.

About Kerry Kobashi

Kerry is the founder of KerryOnWorld. He lives in Silicon Valley and has worked as an engineer and project manager. He owns Kobashi Computing a consulting company.