Back in 2010 during the 16% summer correction following the Flash Crash, I wrote a series of posts about IBM, and what the stock’s performance meant to the broad market. Starting with this post, I argued that a very big move was imminent in the stock, and that move was likely to be up and out. I outlined several technical reasons for having a bullish bent to my analysis. Given IBM‘s standing as the grandaddy of mega-cap technology, it was hard to see how the rest of the market could collapse into a vicious bear if IBM was on the brink of a huge breakout. In addition to several other bullish divergences that summer, I started to become increasingly bullish on the market as Labor Day approached. As they say, the rest is history.
Returning to “Big Blue,” you can see on the updated monthly chart below that the stock has had an incredible run higher since that tight summer 2010 period of consolidation. The issue is whether that steep angle of ascent can continue higher in the coming quarters (remember, this is a monthly chart). I would submit to you that, unlike two years ago, IBM is not on the cusp of a significant leg higher. Instead, I expect sideways action, if not a retracement back to the primary breakout point just above $130, although that would entail a significant price correction. Either way, I do not see a favorable risk/reward for buy and hold longs here. Make no mistake, though, that IBM remains in a very long-term uptrend. I am simply analyzing the next several months.
Now, whether we can once again extrapolate that thesis out to the entire market this time again is another issue. To argue that IBM is either going sideways or down is to essentially throw a wrench in the bull case for major new highs by the end of this year in the broad market. I am going to refrain from making another big call just for old time’s sake. What I will say is this:
- If you have been riding IBM as an investor or a long-term swing, now is a good time to lock in some of those well-earned gains.
- Whether IBM merely grinds sideways versus seeing a steep price correction lower will shed light on where the broad market goes from here–If IBM goes sideways and hangs tough, the broad market can go higher. If IBM corrects all the way back to the $130 primary breakout level, I doubt new highs are coming anytime soon on the major indices.
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Damn, you even give people a heads up to exit your long plays while comparing it to the broad market! Fucking cool.
Nice man cave
i heard it before. if u wanna see which way where the market in general go, take a look at IBM… always learn from history… Thank you, sir
is that the bunker, for real?
Bear in the Big Blue House.
arrrg!!
I could not agree more with your analysis here, Chess. I have no position but have always kept
-IBM- on watch.
Thanks..as always
Big Blue is the dance partner of SnP..
I’d like to see them do the ‘Side Shuffle’ for awhile…
😉
(no break dancing..okay)
good point on general market strategy. its simple, but without reminders we often overlook the obvious. thank-you!
Is that where you trade from? If so that’s one helluva set up.
And good call