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Market Trend: Still Up - But Watch For June

 

July 2 2011 - STOCK - CISCO - CISCO SYMBOL - CSCO

Moving Average Trading Strategy For CISCO

Using The 10-20-30 Moving Averages Rule For Trading Cisco

 
 

5 Years Of Cisco Trades Using Moving Averages Strategy

Part 1 - 2006 to 2007
Trading Introduction:

Trading article by J. Fergus - compiled, edited and presented by Teddi of Fullyinformed.com

I have known Teddi for many years. Teddi introduced me to the 10-20-30 moving averages strategy back in 2005. Just to recap, the 10 day simple moving average with the 20 day exponential moving average and 30 day exponential moving average can be used to time my trades for purchasing and selling a number of stocks. Teddi uses it for options. A good understanding of the 10-20-30 day moving averages strategy can be found here. I paper traded the strategy for 2005 and part of 2006 and did quite well. I decided to then use real capital to apply it to a number of trades.

With so many investors moaning about Cisco Systems, I thought I would give these trades to Teddi to put on the site for others to consider and possibly re-think their approach to Cisco and perhaps other stocks as well. The trading details and comments are mine. Teddi did all the charts, revised my comments so they can be followed by readers and put together this article. I understand fullyinformed.com is donation supported so if you find value in my trades I hope you will use the tip jar.

While no strategy is perfect or foolproof, I use this stock moving averages strategy to help time my moments when to buy stock and sell it. As well I enjoy selling uncovered calls when the opportunity presents itself. I do not sell puts. Unlike Teddi I have never really been good at timing my moments to sell puts and I am a short term trader. I have no interest in selling puts 6 months out as that is too long a time frame for myself. As Teddi always says, you have to be comfortable with your trades and I like short term trading.

Selling uncovered calls is a favorite of mine as I see no reason to be worried about selling calls. For one thing, stocks tend to fall a lot faster than they climb. For this reason alone I never enjoyed selling puts. I believe selling uncovered calls is excellent, for if the stock recovers I simply buy the stock and turn the trade into a covered call. To me this seems so natural, as what I want is for the stock to rise, not fall. I think we are all somewhat optimistic as investors and as such we want stocks to rise and reward us. When stocks fall that's when I consider selling uncovered calls. It's the optimist in me. I believe the stock should rise and by selling uncovered calls I feel I have placed my bet on the stock rising to meet my strike. If the stock fails to rise, then I have benefited through the call I sold, while waiting for the stock to recover.

I started the trade in Cisco in the summer of 2006. I have broken this trade into years to make it easier to follow.

Date

Comments & Action (all figures include commission charges)

Debit/Credit

Balance

Cisco Chart - August 18 2006

Aug 18 2006 Bought 1000 shares at $20.55.
I had been following Cisco Systems stock for some time and noted a very clear break to the upside. Both the 10 day simple moving average and 20 day exponential moving average crossed over the 30 day exponential moving average. I bought and was quite pleased when the next day the 10 day simple moving average widened from the 20 and 30 day EMA. This I have found through paper trading is a good bullish sign.
(20554.95)  

Cisco Stock - Jan 29 2007

Jan 29 2007 Sold 1000 shares at $26.20
This was a pretty easy trade. The 10 day simple moving average fell through both the 20 day EMA and 30 day EMA two sessions earlier. I really show have sold these shares last week, but I had hoped for more upside.
26195.05 5640.10

Cisco Stock Chart -  Feb 15 2007

Feb 15 2007 Bought 1000 shares at $27.50
The 10 day SMA (Simple moving average) crossed the 20 day EMA (exponential moving average) and 30 day EMA. You can see from the chart that in hindsight, it was a bad purchase. These things happen though as there is no guarantee that any strategy is foolproof. I have also found that to win with any strategy requires consistency. The strategy showed a buy should be done, so I placed the trade.
(27504.95)  

Cisco Stock Chart - March 7 2007

Mar 7 2007 Sold 1000 shares at $25.97
Luckily for me, the stock had pulled back up from its recent sell, but the 10 day was falling further. I therefore stuck with the strategy and sold my shares.
25965.05 (1539.90)

Cisco Stock Chart - April 25 2007

Apr 25 2007 Bought 1000 shares at $26.55
The 10 day simple moving average crossed the 20 and 30 day EMA two sessions earlier. It was time to buy shares again.
(26554.95)  

Cisco Stock Chart - May 24 2007

May 24 2007 Sold 1000 shares at $25.77
In hindsight I should have sold a few sessions earlier when the 10 day began to turn down. I decided after this loss that I would close earlier when there was a profit, rather than take a loss when the 10 day crossed the 20 and 30 indicating a move lower. I know from paper trading that the moving averages strategy is following momentum and therefore it will be delayed.
25765.05 (789.90)

Cisco Stock Chart - June 27 2007

Jun 26 2007 Bought 1000 shares at $27.12
Again, the 10 day SMA crossed the 20 and 30 day EMA, telling me to buy shares.
(27124.95)  

Cisco Stock Chart - Nov 1 2007

Nov 1 2007 Sold 1000 shares at $32.35
The last couple of sessions the stock rose but the 10 day SMA stayed below the 20 and 30 day EMA. I didn't want to take a loss after holding the stock since June. I decided to sell. In hindsight I could have waited a couple more sessions but at the same time the stock then fell hard in 5 more sessions, so it was good to lock my profit in.
32345.05 5220.10
  TOTAL INCOME TO NOV 2007 - $8530.40
Largest Amount Invested - $27124.95
Return on capital - 31.4%
   
Summary To End Of 2007

I learned a few things about using this strategy, but the most important was to close the trade early by selling my stock when the profit is there and it appears the 10 day may be turning down. It is better to make a profit even if it means I close too early and could have earned more. The most important aspect was to not lose the profit.

Continue To Part 2 - Cisco Trades For 2008

Related:

Read the strategy paper on the 10-20-30 Moving Averages Strategy
Review the Research In Motion Trades Done Using The Moving Averages Strategy

 

 
 

Disclaimer: There are considerable risks involved in all investment strategies. Trade at your own risk.
Stocks, options and investing are risky and can result in considerable losses. None of the strategies, stocks or information discussed or presented are financial advice, trading advice or recommendations. Fullyinformed.com is a private website. Everything presented and discussed are the author's ideas and opinions only.
By using this site, you agree to be bound by its terms of use. The full terms of use can be read here. If you do not agree to the terms of use, do not use this site. The author of fullyinformed.com assumes no liability for topics and ideas discussed, errors and omissions, ads and their content and external links. Any corporate insignia used are registered trademarks of their respective company or corporation and are being used for identification purposes only. All material copyrighted by FullyInformed.com. Reproduction in whole or in part prohibited. Copyright 2008

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