NEW DIRECTIONAL CALL PLAYS

Cisco Systems - CSCO - close 23.29 change -0.04 stop 22.20

Company Description:
Cisco Systems, Inc. designs, manufactures and sells Internet protocol (IP)-based networking and other products related to the communications and information technology (IT) industry, and provides services associated with these products and their use. The Company provides a line of products for transporting data, voice, and video within buildings, across campuses, and around the world. Its products are designed to transform how people connect, communicate and collaborate. The Company’s products are installed at enterprise businesses, public institutions, telecommunications companies, commercial businesses and personal residences. It has five segments: United States and Canada, European Markets, Emerging Markets, Asia Pacific, and Japan. The Emerging Markets theater consists of Eastern Europe, Latin America, the Middle East and Africa and Russia and the Commonwealth of Independent States. In December 2009, the Company completed its acquisition of Starent Networks..

Target(s): 23.55, 24.20
Key Support/Resistance Areas: 23.65, 22.55
Time Frame: Several weeks

Why We Like It:
CSCO has been building a nice base for the past 3 to 4 weeks and is trading in a $1 range (4.5%) between $22.55 and $23.55. $22.50 is key pivot level for the stock dating back to 2006. It appears the stock may want to break out of this base, but we don't necessarily need that to happen for a profitable trade. CSCO looks stable here with a lot of support and I suggest we take advantage of the reliable price pattern that is being built. I would like to use $22.85 as a trigger to enter long positions. If triggered readers should be able to purchase July $22.00 calls for about $1.30 (current ask is $1.64). If CSCO then proceeds to rally to the top of its base at $23.55 we should make about 55 cents on the position for a +40% gain. If CSCO breaks out it could rally to fill the a gap which is up near our more aggressive 2nd target of $24.40 and below the stock's 200-day SMA. Another entry could be considered at $23.05. Our Stop will be $22.20. NOTE: I view this trade as potentially being quick.

Suggested Position: Buy July $22.00 CALL if CSCO trades down near $22.85, current ask $1.64, estimated ask at entry $1.30

Annotated Chart:

Entry on June xx
Earnings Date 8/5/10 (unconfirmed)
Average Daily Volume: 69 million
Listed on 6/16/10