Cisco Systems: Topping Formation—Short-Term Correction Brewing After Bullish Run

1. Long-Term Trend & Context

a) Trend Structure (Daily)

Looking at the daily candles, CSCO has displayed robust gains from mid-April 2025 onward, rebounding sharply from a low of $53.18 (Apr 7) to $64.26 (May 15), peaking after several strong gap-ups and heavy volume days. Since reaching $64.26 (May 15), the price has oscillated and consolidated near the $63–$64 zone, with an apparent loss of upward momentum just below the recent high.

b) Volume Profile

Significant accumulation volume is visible between the $59.50–$61.50 area (late April–early May), coinciding with the apparent structural breakout. There is also a notable volume spike at the $64.26 peak, suggesting potential distribution.

c) Macro Support/Resistance

• Support: $61.00–$62.00 (former resistance), $63.00 (minor short-term level)
• Resistance: $64.26–$65.00 (recent highs), $66.00 (mid-Feb peak)

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2. Short-Term Trend & Market Structure

a) Recent Intraday (May 20–21)

• Price has gradually faded from $63.85 to a low of $63.11 overnight.
• Live price at $63.42 is consolidating above short-term support.
• Several 1H candles display long lower wicks but no strong bullish reversal bars.

b) Price Action Patterns

• After the May 15 breakout, price failed to retest the high, pulling back instead.
• Today’s candles show lower highs and flattening closes, suggesting waning bullish momentum and potential distribution.
• No clear reversal pattern yet (e.g., double bottom, hammer), but no sustained buyer defense.

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3. Technical Indicator Analysis

a) Moving Averages

• 20-day SMA: ~61.90 (Price is above)
• 50-day SMA: ~60.22 (Price strongly above) Both indicate a bullish primary trend, but current price is extended and flattening out.

b) RSI (est. from price patterns)

• Overbought region touched on breakout days. Recent action likely has RSI dropping from 70+ to ~55–60, indicating loss of steam but no clear oversold/reversal yet.

c) MACD

• MACD spread should have recently peaked and is now converging downward, showing trend exhaustion and potential for mean reversion.

d) Bollinger Bands

• Earlier in May, price hugged the upper band with strong momentum. Now, bands are contracting with price moving sideways, and currently trading just under the upper band, suggesting reduced volatility and possible consolidation or correction.

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4. Chart Patterns & Classic Analysis

a) Pullback After Breakout

• The sharp up-move through $61.60 (May 15) was followed by several days lacking higher highs – a possible sign of post-breakout exhaustion.

b) Micro Lower Highs

Since the top, lower highs have formed ($64.09, $63.92, $63.84, $63.74), reinforcing sellers’ presence and lack of aggressive buying.

c) Support-Resistance Flip Zone

• The area from $62.80–$63.40 is an obvious support-turned-resistance region.

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5. Statistical & Sentiment Analysis

a) ATR (Estimated Volatility)

• Average True Range over last 14 days is about $0.80–$1.00, indicating medium but contracting volatility.

b) Sentiment & Positioning

• Heavy volume top and a tapering of the up-move indicate bullish sentiment is fading and swing traders may start unwinding.

c) Options Skew (inferred)

• Elevated near-term upside calls likely being sold off after the run-up, while downside puts gain traction in the $62–$61 support region.

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6. Multi-Timeframe Confluence

• Weekly structure: Major bullish move followed by indecisive candles, indicating potential topping pattern for the short term.
• Daily structure: Minor distribution, price unable to retest highs, rounding below resistance.
• Hourly structure: Weak bounce attempts repeatedly fail, with consistent fades to lower levels.

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7. Trading Plan and Risk/Reward

Given the loss of momentum, proximity to major resistance, fading volume, and lack of bullish reversal, a short (Sell) is favored for a mean reversion pullback toward $62.50 or even $61.70 in the short-term. Downside risk is modest as major support lies below $62.

Trade Structure

• Entry: Wait for a bounce back toward $63.50–$63.60 for optimal entry (slightly above spot, near intraday pivot)
• Stop: Above $63.90 (recent minor high)
• Target: $62.50 (just above near-term support, allowing for reactionary bounces)

Summary of Signals:

• Primary Trend: Bullish but overextended, showing early signs of topping short-term.
• Momentum: Waning, MACD converging. RSI descending but not yet oversold.
• Pattern: Lower highs, topping formation.
• Risk: Limited as strong support exists in the $62.00–$62.50 range

Bias: Short-term tactical pullback.

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