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Cisco Systems Inc (CSCO): Gappy Charts and Bearish

 

Reuters just reported that Cisco (CSCO) will have a sales miss for this quarter with more jobs cuts expected.

The key points to note for Cisco is as follows:

1. Cisco’s core businesses is UNDER THREAT.

  • On the low end, competitors comes in the form of Netgear (NTGR), despite the fact that it owns Linksys.
  • On the high end, there’s Huawei from China.

In other words, there is very little room for growth in its traditional stronghold.

2. Transitional Period

Much has been said about its transition. While Cisco is pretty much cash rich, with little debt, there is no guaranteed that the transition will see light.

Just not too long ago, the newly acquired FLIP was dumped.

Traditionally, Cisco is used to selling hardware (routers, switches etc). The transition may mean more services and that does requires a change in approach.

3. Ichimoku Chart for CISCO (CSCO)

Nonetheless, we can see from the Ichimoku chart above, CSCO has at least 4 gap down May 2010 when it break the kumo support.

The trend is clearly bearish. With more cost cutting expected, I won’t be surprised if it can touch $15 or even $12 if the overall market turns bad.

 

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Tech

Netgear Inc (NTGR) : Trying to break 52 week high

Netgear (NTGR) gapped up today and is attempting to break its 52 week high.

Resistance from the Chikou Span is at around $28.85

If it clears the 52 week high and stay above, the next target will be around $35 (its high way back in 2007)

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Tech

Netgear Inc. (NTGR) : Kumo support and Cisco’s problems

Netgear fell about 9% during the first half of the day due to Cisco’s revenue call that their home networking unit (Linksys) was down 8% for period ending May 1.

My bet is Netgear (NTGR) will not suffer from this revenue drop and could even be eating into Cisco’s share.

From the Ichimoku chart, it is supported right at the kumo level during the first half and started to move up during the second-half of the day.

Note:

Barrons has an update. Atheros (ATHR) has updated and do not see any weakeness in their business moving forward this year.