IBM 5100: Considered to be the world’s first commercial portable computer.
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Although $HPQ is the talk of the town over the weekend as well as likely into next week, I am more intrigued by $IBM. “Big Blue” has been consolidating at its all time high price for the past several quarters. While $IBM is not the end all and be all of the American economy, it is still a resilient firm that has survived and subsequently thrived after previous bear markets. Moreover, do not forget that we are talking about a firm with a market capitalization of nearly $167 billion.
Looking at the stock in multiple time frames, it is becoming increasingly clear that $IBM is on the cusp of making a huge move. The daily chart, seen below, supports this argument, as we see how compressed all of the major moving averages have become.
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The weekly chart, seen below, illustrates how tight of a trading range the stock has been in for nearly ten months. Again, this supports my thesis that the stock is about to make its next big move, as ten months of sideways action is an extraordinarily long time, and it sets the stage for the stock’s next big move.
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The monthly chart, seen below, puts the puzzle together, as we see just how sensitive the stock is to its prior highs over the past decade. Indeed, as the saying goes, price has memory. Compared to the previous times when the stock has been up above $130, this time the stock is consolidating in a much more orderly way. Again, this supports the idea of big move coming. The evidence suggests that move will be up and out, rather than a total collapse.
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The thesis that $IBM is on the verge of a major breakout begs the question of how this applies to the broad market. While it is possible that $IBM could breakout, yet the broad market sells off or continues to chop sideways, I do not believe it to be a probable scenario. Although it does not seem likely, given the fundamental backdrop that the U.S. and global economies continue to face, a decisive $IBM breakout above the low to mid $130’s would presage a fresh leg higher in the senior indices.
Perma bears are certain to look at the same charts that I am and infer that $IBM is topping, an will lead us down below 1,000 on the Dow Jones Industrial Average over the next few years. There really is not much that I have to say to someone like that. First, I have no position whatsoever in $IBM. Second, I conduct my analysis as objectively as I can, and looking at Big Blue in multiple time frames has led to me to my thesis. At the very least, $IBM ought to be on your list of scans as yet another broad market “tell,” along with $FCX, $XLF and $FXY.
NOTE: Hat tip to @zortrades on the stream, as he did some good work on $IBM a few days ago.
love the thesis, this is the kind of stuff i do in my scans as well
thanks–see how it plays out
morning, sir.
loving the IBM breakdown you have performed for us. i think it is telling anyone willing to listen that we are going higher.
ty
thanks duane
I thought FCX had poor price action on Friday. Looked like it was going to rally along with the whole market, sold off with the whole market and then never rebounded when the rest of the market did. Anything to be made of this? It looked like it should have broke back thru the 200 day when the market recovered, I was surprised it didn’t.
I disagree. FCX was up the whole day, even when the market was down huge. Thus, it was a tell, since the market recovered. While it is true FCX was not up 2-3% by day’s end, it still handily outperformed all day and a true tell.
Great post bro – IBM definitely something to watch over the next couple of days, perhaps weeks!
thanks Moose
Interesting stuff, great way to spell it out for those of us less in the loop. Interesting to see how this plays out. I need some wine, that last block of brie didn’t go down soooo smooth.
Do they have Parmigiano Reggiano out by you?
Sooo,
129.05/ 131.20 ish… the range to look for basically?
I’m doing this on paper…fx is my main stay….4now
Chuck,
I am looking for a sustained breakout above $135. But yeah, the tight range is what you mentioned.
Thanks for reading.
Thanks for the thought provoking post. Here is another data point for you to consider – try the quarterly chart and it further bolsters the thesis about more upside soon. http://chart.ly/s33xad. From my perch, technicals support further longer term upside movement on a quarterly basis. Also RSI is allowing more room to propel higher as it is still not in overbought territory on a quarterly basis.
Good post chess.
I think we should also consider if IBM is worth more today than it was during the speculation in the dot com boom or more important in 2008.
or will it be the stimulus that takes it to new highs?
also when comparing highs do we need to consider stock offerings and splits?
Top self analysis as always! Keep up the great work!
great charts and thinking but what about the fundies? what is going on with IBM that it warrants a higher price? used to be a computer company but seems more like a ute these days – any opinions?
See their earnings over the past ten years–they have steadily improved. IBM at $130 now is much cheaper than it was ten years ago.