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Here’s why one trader sees Cisco shares heading higher on earnings

Cisco stock has been on fire over the past year, surging 28 percent, and one trader thinks there's more room to run ahead of earnings.

The tech giant reports earnings after the market close on Wednesday, and the options market is pricing in a 4 percent move in either direction for the stock.

"That's actually a little rich to the average over the last four quarters. It's been about three percent," Dan Nathan of RiskReversal.com said Tuesday on CNBC's "Fast Money."

Cisco has had a strong year. Shares are up over 13 percent — outperforming the S&P 500 in 2017.

"Pretty good performance here; cheap stock traded 14 times below a market multiple," Nathan said.

If the stock moves lower on the heels of its earnings report, Nathan said, "[Cisco has] really good support back at that breakout level down at $32. That's a little more than the implied move to the downside. I bet you it gets bought there."

However, "[Cisco] has a lot of room to run to the upside … you [could] see this thing up easily in line with the implied move and probably heading higher towards $40," Nathan said.

Cisco shares were trading at the $34.14 level during midafternoon trading on Wednesday.

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