DailyPlay – Opening Trade (CSCO) – August 21, 2024

CSCO Bullish Opening Trade Signal

Investment Rationale

As CSCO works through reinventing itself and shifting away from its core business of selling network hardware, there are some signs that investors are starting to pay attention. Despite revenues declining for the 3rd straight quarter and cost cutting, there are signs that brighter days are ahead for CSCO and worth considering for adding some bullish exposure. 

Technical Analysis

Having been on a downtrend since Sept of last year, CSCO’s recent gap higher has broken the bearish trendline. It recently gapped higher on earnings and is now starting to breakout above its $50 resistance level, which would open up $53 gap fill and $54 upside targets. 

CSCO – Daily

Fundamental Analysis

With its recent partnership with NVDA and focus on AI, CSCO’s shift into cybersecurity and software will allow it to trade a higher multiple. Currently at 20x forward earnings, its at a discount to its peer, due to its slower than expected growth, but that is expected to pickup over the next few quarters with margin expansion. This translates to some upside potential in its valuation. 

Trade Details

Strategy Details

Strategy: Long Call Vertical Spread

Direction: Bullish Debit Spread

Details: Buy to Open 20 CSCO Oct 18th $50/$52.50 Call Vertical Spreads $1.01 Debit per Contract.

Total Risk: This trade has a max risk of $2,020 (20 Contracts x $101) based on a hypothetical $100,000 portfolio risking 2%. We suggest using 2% of your portfolio value and divide it by $101 to select the # contracts for your portfolio.

Trend Continuation Signal: This is a bullish trade on a stock that is in a strong bullish trend and expected to continue higher.

1M/6M Trends: Bullish/Bullish

Relative Strength: 7/10

OptionsPlay Score: 107

Stop Loss: @ $0.51 Debit (50% loss of premium)

View CSCO Trade

Entering the Trade

Use the following details to enter the trade on your trading platform. Please note that whenever there is a multi-leg option strategy, it should be entered as a single trade. 

PLEASE NOTE that these prices are based on Tuesday’s closing prices. Should the underlying move significantly during the pre-market hours, we will likely adjust the strikes and prices to reflect a more accurate trade entry. 

View CSCO Trade