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Bearish action for tech, has Cisco looking toppy

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As the session progresses, it isn't looking likely that bulls are going to get any near-term help from history that has seen the markets trade higher 14 of the last 18 weeks following the Memorial Day weekend.

Today's action has me taking a bearish look at shares of networking giant Cisco Systems (NASDAQ:CSCO) $16.16 -2.47% in this morning's market monitor, with the observation that the stock looks a "little toppy" and vulnerable to the $14.00 level.

Cisco Systems Chart - Daily Interval

Shares of CSCO jumped higher after reporting earnings on 05/07/02 after the close of trading and then managed to break outside of its downward regression channel. I think the stock looks toppy here and vulnerable to filling its gap and testing the target of a bear at $14 over the next couple of months. Traders can establish bearish positions here, with a nice stopping point just above the lower trending 200-day moving average. A break back below the $15.27 level of retracement should see some volume come into the stock.

One thing that has me turning bearish again on Cisco (CSCO) is that some of the telecom service stocks continue to show bearish activity, thus my thinking that spending on equipment will continue to be trimmed from many of the telecom service providers as they try and get some earning to flow to the bottom line.

NASDAQ-100 Trust Chart - Daily Interval

On Thursday, I profiled a bullish trade in the QQQ at $31.07. By session's end, the QQQ had rallied and closed at its session high on news that Biogen (NASDAQ:BGEN) was most likely going to get a favorable review for its Amevive drug. Since then however, the QQQ has been under pressure. This gives a negative tone toward technology and Cisco (CSCO) looks to be rolling lower. With telecom service stocks like AT&T (NYSE:T) $12.51 -2.18% hitting a new 52-week low, I'm not seeing bullish signs in the telecom service sector that would have me thinking that capital expenditure budgets for telecom equipment are going to be growing anytime soon. This type of thinking should have CSCO seeing some selling pressure once again.

Jeff Bailey
Senior Market Technician
Option Investor

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