12:55pm (EST)
Futures were pointing towards a nice pop at the open as some of the Tech names reported better-than-expected earnings while jobless claims came in under 400,000 again. However, despite the strong start, the momentum has failed to hold as the indexes gave back all of their gains with the S&P and Nasdaq briefly falling into negative territory.
Cisco Systems (CSCO, $18.72, up $1.11) has been in a solid uptrend since bottoming in August at $13.30 on its intraday low. The company reported a profit of 43 cents a share on revenue of $11.3 billion versus expectations for 39 cents/ $11 billion. More impressive is the fact gross margins came in at 61% in a sector that is full of competition – and they raised guidance for the quarter.
John Chambers, Cisco’s CEO, has been at the helm for nearly two decades and we figured the company would beat the lowered expectations after he promised a turnaround. Cisco has a history of beating the Street by a penny so his aggressiveness to right the ship is paying off.
Although we didn’t play a directional trade on Cisco Systems for our Daily publication, we did recommend the stock as a covered call for our Weekly Wrap. If shares hold up, we should get “called-away” at $17 next week when the November options expire. In fact, we have 3 trades which should get called away next week with gains of 23%, 17% and 10%. This will run our track record to a perfect 15-0 for 2011.
It looks as though trading could stay choppy for the rest of the week but we are expecting more bullish action, especially next week and into Thanksgiving. However, we could experience a little bit more of a pullback before the bulls break past the upper layers of resistance we have been outlining for the past few months.
The Dow is currently up 92 points to 11,873. The index is off its highs for the day and the low has been 11,779. We have been saying we expect 11,800 to hold (with backup at 11,600) but it would be a bonus if the bulls can close above 12,000 today. With the European markets now closed, hopefully we can get there.
The S&P is higher by 8 points to 1,237. The index traded down to 1,227 and we have penciled-in 1,225 as the low. If this level were penetrated, the 1,200 level would be crucial in holding or the bulls risk a trend change. Of course, the bulls are pushing for a close above 1,250.
The Nasdaq is down a point to 2,621. Tech has traded to a low of 2,601 and came within spitting distance of breaking under our 2,600 downside target. Backup is at 2,550 but we are hoping for a close above 2,650 today.
We have a lot to cover with our current trades so we will be back in the morning with the latest and greatest. Subscribers, check the Members Area for the updates.
