a short history of CSCO buying opportunities:
date, previous high, low, % decline:
4/99: 120 to 100 (so far)= 17% down
2/99: 118 to 91 = 23% down
10/98: 70 to 41 = 41% down
4/97: 34 to 21 = 38% down
I read the stock prices off a chart, so they may be off by a point or two.
Let's see.......if we go down on this downturn as much (in %) as in 2/99, we'd hit 92. And if the decline is as bad as the 10/98 and 4/97 sell-offs, then we'd go down to 71 or so. Unless someone knows something I don't, (and they also have a lot of money), then the current sell-off will be like 2/99, not 10/98. This is a sector rotation, nothing more. In 10/98 there was palpable fear, panic selling. People were selling all stocks, and going to cash and bonds, Nobel Prize winners in Economics were having margin calls. No, it won't be that bad this time.
The log graph of CSCO for the last 10 years looks like a straight line, tilted at about a 35 degree angle above horizontal. The normal trading range is within about 7% on either side of that line. We've just now broken below that trading range, indicating that another buying opportunity is approaching. These happen once every year or two.
Lots of stocks need to form a base, after a sharp decline, before they can move back up. Not CSCO. It's downturns are V-shaped, not U-shaped. As soon as it stops going down, it starts moving back up, just as fast, till it gets back to that long-term trend line. Waiting till you're sure the decline is over means you waited too long.
I have a few index puts I've been saving for a rainy day, to keep from getting soaked on days like today. I'll be selling them soon, and buying some CSCO. I'll probably start buying at 92, and buy in increments with every 5-point decline thereafter. As soon as I see any hint that the selling pressure is subsiding, I'll buy as much as I can.
The other thing I'm thinking of doing is selling the CSCO stock I bought in 4/97, and using the proceeds to buy out-of-the-money longest-term LEAPS. 120 strike price, maybe higher. Too bad the 2002 LEAPs aren't available yet. This downturn will probably be over by the time they're available (mid-May, I think). Even with today's selloff, my stock is worth almost 5 times what I paid for it 2 years ago, but I'm greedy, the LEAPs should do much better than that.
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