CSCO Rallies As We Anticipated After Earnings Release

During earnings season, Mike Paulenoff scours his chart work for setups that might provide technical "hints" to MPTrader members regarding the probable directional market reaction to a particular company's quarterly report.

Last Wednesday afternoon (Feb 15), prior to the company's earnings report, Mike posted his setup work on CSCO, noting:

"CSCO reports earnings after the close. Based on the setup exhibited by my attached 4-Hour Chart, I am interpreting the 2-1/2 month sideways Coil formation as a bullish digestion period and pattern atop the upleg off of the October low at 38.61, which if proven accurate, argues for an upside reaction to earnings that propels CSCO above the December high at 50.46 toward target zones at 55-57 and possibly 59-61. In the event of a negative reaction, a sustained break of 46.50 will leave CSCO vulnerable to a press into the 42-43 support area... Last is 48.35."

As it turned out, CSCO beat The Street's expectations on earnings, revenues, and visibility, which triggered a powerful positive reaction from the 4 PM ET close at 48.52 to a post-market spike high at 53.60 (see Mike's chart below), an initial thrust of 10.5%. 

Although CSCO gyrated into a two-way trade after the initial 10.5% reaction that circled 50-51 into Friday's close at 50.77, the stock ended the week 5% above where it was trading when Mike initially provided the "directional pre-earnings setup hints" to MPTrader members. 

What is next for CSCO? Will the stock revisit and take out its post-earnings high, or alternatively, was 53.60 an upside exhaustion spike? Mike will be watching the price behavior of CSCO closely for its next and likely technical direction, as well as other names impacted by earnings next week, such as WMT, HD, NVDA, and MRNA.

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