Options Corner: CSCO Record Climb into Earnings

Añadido: 2026-05-14

[00:00:00]Time now for options corner. Joining us to take a deeper look at the chart is Rick Duke at lead market technician. All right, Rick, walk us through the trends you notice in this chart.

[00:00:08]Yes, good morning, Diane. You know, Cisco, one of those companies where it seems like you can't walk around an office building and not find a product made by them in some capacity. But if we were to pull up our first chart and just look at the comparison, Cisco up 60%, almost 61% during the past 52 weeks.

[00:00:26]Meanwhile, we can see that the XLK tech sector ETF up more than 50% during that same period. So, the uh overall sector for hardware kind of challenging lately too because of these expanding memory costs. We can see that you know, these companies in general face kind of a tricky situation where the the server and AI infrastructure businesses are very strong, but it's kind of juxtaposed with this challenging environment that we see for these you know, memory products. They're necessary to so many other things. So, if we were to just jump into our candle chart then, we can see that Cisco has been trending upward in a channel type shape for the the past month or two. We can see that we did hit those highs 99.93 more recently.

[00:01:22]Some areas to watch in terms of horizontal support and resistance include 99.93 our highs that we established yesterday.

[00:01:31]If we could pull up our next chart, we would see you know, we have the 93 level as well that marked a low point that we saw during our ascent. The 90 level as well was another high point that was carved out. 87 too. An old high before we had our earnings gap to the downside and then a breakout point and a subsequent low that held on after that that climb. So, you always want to be interested in areas like that where we had a significant high and then subsequent lows that held firm at that same position. So when we do consider our next chart here, we can see that our moving averages that we follow the 5-day dark blue EMA 9661.

[00:02:15]That's the closest to our current price activity in this case here. So if we were to to break below our channel though, our 21-day EMA in teal 9086 presents another possible supportive area. So the moving averages in general, they are diverging farther apart from each other. Price remains above all of them here. Not really any signs of potential trend change or interruption.

[00:02:39]What you'd be looking for would be for price to start closing below those moving averages and for their slope to change from up to down. The fastest moving averages will react the quickest most you know, obviously, but they are the least reliable as well.

[00:02:53]They are the the most prone to fake outs and false signals just in general. RSI also remains elevated too. That 76 reading is pretty darn high. We seem to be making new relative highs as well.

[00:03:05]Often times RSI momentum slow down heading into earnings. So kind of an unusual situation that you would want to see if you are bullish in this name.

[00:03:16]Okay, what's the approach you would take for an example trade, Rick?

[00:03:19]Sure. So one trade you could consider for this one here would be more of a bullish type of trade here. A call butterfly would be looking to take continued advantage of upside in a name that's seen some strength looking for continued growth over the next couple of months here. So plus one August 21st 100 110 115 call butterfly at a $2 debit here. So $200 are max loss is our debit paid for this one and this is an unbalanced butterfly. remember. A conventional butterfly, the strikes are equidistant apart of that central short strike where you sell to the other strikes are are equally spaced. But in this case, we have a imbalance between them to give us this more lopsided risk profile. The conventional butterfly runs the risk of a winner turning into a loser if you get unexpected strength for a call butterfly. In this case, you overshoot your target. In this case, our max profit $800 our sweet spot if we were to hit that exact point at expiration. That would be you know what you would ideally want here. I mean, but if you were to overshoot that mark, then you wouldn't have that that same problem. So break even 102 3% or so to the upside expected move 13.5% here. So topping out around that 112.4 level or so based on our expected move range projected by the options market. So well within that range and our our protective higher long strike kind of lining up with that expected move range.

[00:04:59]So if you got to stop somewhere, that seems like one area you could consider at least based on the options market.

[00:05:05]All right, thank you Rick. Appreciate that. That's an example trade there for Cisco. It's got quarterly results due after the close of trading today.