Why Tony Zhang Says Cisco's Stock May Be Ready To Break Out

On CNBC's "Options Action," Tony Zhang said the transformation in Cisco Systems Inc CSCO to “a higher margin services type business” is “continuing to pay off,” and is likely to do so into 2022.

Although the chart shows the stock is at a “clear breakout level” at $60, a lot of investors may have missed out on this breakout, Zhang mentioned.

The stock has pulled back to this level over the past week, representing an “opportunity to seek some upside exposure,” he added.

While Cisco Systems is in the technology sector, it’s worth taking a look at the stock’s performance relative to the communications sector, which the company is a big part of, Zhang said.

Looking at the communications sector, the stock has “underperformed the broader markets for quite some time,” he further mentioned.

“Over the last 18 months, it has completed this bottoming formation and is starting to outperform the communications sector in addition to outperforming the technology sector,” Zhang said. This signals that “the breakout here above $60 on Cisco is constructive and is likely to get a revisit at the $65 level and continue higher,” he added.

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