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Technology Stocks : Cisco Systems, Inc. (CSCO) -- Ignore unavailable to you. Want to Upgrade?

To: David B. Higgs who wrote (11017)	12/17/1997 6:47:00 AM
From: Sowbug	Read Replies (1) \| Respond to of 77400

There was an interesting article in Tuesday's Los Angeles Times about how technical analysis would have predicted the drop of Oracle last week. I will summarize the article and then try to apply it to Cisco. There were three aspects of Oracle's charts that were relevant. First, moving averages: excluding the October correction, in mid-November and early December, the stock began dipping below the 200-day moving average, after having crossed below the 50-day moving average in September and staying below it. I suppose this is an indicator of momentum. Second, trading volume on days when the stock made significant moves: for the last few months, there was heavy volume on days when the stock dropped more than a few percentage points, and only rarely was there heavy volume on days when it moved significantly up. This suggested that there were many stockholders waiting to get out of Oracle, rather than many potential shareholders eager to get in. Third, a declining average relative strength, using a rolling 31-day average: the average relative strength dipped to 40 only days before Oracle's crash. This technical analysis stuff is new to me, although I have of course heard people talk about moving averages and double dips and the like. So all the rest of this post is the work of an amateur. Moving averages: Cisco has not crossed below the 200-day moving average in the last year. It has come close twice, and you probably remember both times. It is currently trading below the 50-day moving average, but it could easily cross back above on Wednesday (although that's something to look for). Trading volume: my chart source is bigcharts.com, which isn't perfect, but by lining up a piece of paper on my monitor to try to match up trading volume with days on which Cisco's price moved significantly, I would say that in the last year the big volume down days outnumber big volume up days 2 to 1. Oracle, by comparison, was more like three to one. Relative strength: I have no idea (don't know where to get it, besides Investor's Business Daily). Although the chart looks like it is moving generally upward, December appears to be pretty weak. So, my conclusion? Well, what do you know, it could go either way. The 200-day moving average appears to be right around $69 ($46 after the split takes effect), so that is the number to look for. Right now, my basic, amateur, untrained technical analysis doesn't give any warning signals or green lights, but it does tell me that crossing below $69 might be just such a warning signal. I would appreciate feedback from any of you technical analysts out there (I have already heard lots of criticism of technical analysis in general, so I don't think it would be very productive for anyone to post messages slamming TA). And, incidentally, I should mention that I am currently short Cisco, if that colors your opinion of the quality of my analysis.