A Pairs Trade: Cisco & Citrix (w/ Doug Busch) | Trade Ideas | Real Vision™

TL;DR

Doug Busch of Chartsmarter.com recommends buying Cisco and shorting Citrix Systems based on strong technical indicators and price action.

Transcript

Welcome to Trade Ideas. I'm Jake Merl, sitting down with Doug Busch of Chartsmarter.com. Doug, great to have you back on the show. Thanks, as always, for having me. So today, we're going to be looking at two specific trades, both a long and a short. But before we get into it, we're going to be taking a look at the overall market. So what are you se... Read More

Key Insights

• 🥳 Every major S&P sector is seeing positive gains, but potential concerns exist with Apple's stock performance and the dip in the Russell 2000 to NASDAQ ratio chart.
• 🍳 The Russell 2000 is still performing well overall, and a break above 1,600 would be a bullish signal.
• 💪 Cisco is showing strong upward momentum with a measured move target at $69.
• 🥺 Citrix Systems is displaying weakness compared to the software sector, and a breakdown could lead to further declines.
• ⚾ Both trade ideas are based on technical indicators and price action rather than fundamentals.
• *️⃣ Risk management is key, with predefined stop losses for each trade.

Questions & Answers

Q: Why is Apple's stock performance concerning?

Apple's stock being 19% off its recent highs and trading below its 200-day moving average is concerning because it is considered a proxy for the market. If it can break above the 200-day moving average, it would be a positive signal.

Q: What is the significance of the ratio chart comparing the Russell 2000 to the NASDAQ?

The dip in the ratio chart in March is concerning because small caps are often seen as leading indicators. Additionally, this dip happened just once before in March 2000, and shortly after, the market experienced a significant decline.

Q: Why is Cisco a good long trade idea?

Cisco is a good long trade idea because it is higher by 24% year to date, trading at 18-year highs, and has shown consistent strength. The chart displays bullish traits, and a breakout could lead to further gains.

Q: Why is Citrix Systems a good short trade idea?

Citrix Systems is a good short trade idea due to its underperformance compared to the overall software sector, multiple weeks of losses, and a breakdown from a tight trading range. The round number theory also suggests potential weakness.

Summary & Key Takeaways

• Every major S&P sector is higher by at least 6% year to date, which is a positive sign for the overall market.

• Concerns arise from Apple's stock being 19% off its recent highs and trading below its 200-day moving average, as it is a proxy for the market.

• The ratio chart comparing the Russell 2000 to the NASDAQ dipped in March, indicating potential weakness in small caps as a leading indicator.

• Despite concerns, the Russell 2000 is still higher by more than 14% year to date and could break above a bullish inverse head and shoulders pattern.