You’re Still My Boy, Big Channel Blue

Despite being relegated to an algo-friendly sideways price channel since March 2012, IBM continues to be a decent bellwether for the broad market. Specifically, virtually each of the moves higher in that channel have been accompanied by broad market strength, and vice-versa for weakness.

Dating back to 2010, readers will recall how many times we have looked at Big Blue as a proxy for the broad tape; It often works better than you might imagine. What happened with IBM is that it is still consolidating a massive breakout starting in 2010. In other words, Big Blue could have easily been well out in front of the tape and many other stocks which have only recently emerged from decade-long consolidations.

Going forward, the idea is to watch this well-defined channel closely. It would be quite easy to presume that Big Blue will hold it and V-shape back to highs after the recent sell-off. But if sellers make headway and confirm a bear flag below $189 I suspect it will mean broad market weakness.

First things first, though, and having this chart and stock on your radar is instructive either way.

__________________________________