Overbought Cisco ripe for a small correction
After a nice ride from 27.13 on June 27 to a high of 31.25 on August 9 Cisco is now overbought and ripe for a small correction. Stochastics, RSI and MACD are giving us a selling signal.
Let’s buy the Sep16 (expiry September 16) 31/29 put spread to play a retracement to 29.68 (38.2% of retracement of 27.13/31.25).
Management and risk description
For a $20,000 trading account, we would invest no more than 2% of the account value or $400 on that trade in order to respect some strict money management rule.
Entry: buy CSCO Spe16 31/29 Put Spread at $0.64.
=> buy CSCO Sep16 31 Put at $0.88
& sell CSCO Sep16 29 Put at $0.24
put spreads) to realise a profit of $816 ($1.36 X 100 shares X 6 put spreads) if the market closes at or below 29 at expiry.
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