Support, Wherefore Art Thou?
When a stock is tanking, it helps to have a grasp of
where the major support levels are. This is particularly true of the Nasdaq
bellwethers Cisco
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PowerRating), Sun Micro
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PowerRating).
In their destiny lies, to a great extent, the destiny of the Nasdaq.
The chart of Friday’s action in CSCO is a good example of how an awareness of
support levels can help you in planning your trading strategy.
Four days ago, CSCO broke down below support at its 200-day moving average.
You can tell that this was a fairly important support level because there were
two strong bounces back in May and August of this widely watched moving average.
Next, we had a bounce off the lows of its three-month trading range two days ago. Friday, CSCO is ricocheting off the underside of its 200-day
moving average and aiming to test the three-month range lows once again. If it
breaks below it, the next clear support level is around 50. We could expect the
Nasdaq to get some hefty downward pressure if that happens.
Have a great weekend,