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Some of my loyal readers may remember a series of posts that I wrote last summer analyzing IBM in multiple timeframes, stretching out to the monthly look. The stock had been bumping up against the low-to-mid $130 price range for over a decade, and yet there I was in the depths of last summer’s 16% correction calling for a significant breakout from one of the legendary blue chip stocks of all time.
Actually, this is what I wrote in reference to the monthly chart back on August 8th, 2010:
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.
I then applied the thesis to the broad market and the implications from “Big Blue” breaking out over the next few months, and the only conclusion to draw was that the market was on the cusp of a major leg higher. You can see the full post here.
So, is now the time to make another bold call on Big Blue and the broad market? I am afraid not. As you can see below, the stock has been exceptionally strong ever since clearing the huge $130-range barrier last year. IBM endured the summer crash with remarkable resiliency, and has essentially gone nowhere, net-net, since May. I do not believe the breakout point from last summer necessarily needs to be retested, given how many years the stock came to terms with it before conquering that level, although that 20 period monthly moving average rising up to $150 could easily be tested.
So, we are left with what is likely to be a scenario of going sideways to digest the multi-decade breakout to all-time highs. All things considered, given what has transpired this year, that is not too shabby for Big Blue.
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love that pic/title combo. took me a second but wow its one of the best yet and thats rlly saying somethign
her waist or his shaft … hey is that a pocket calculator falling out of his crowded pocket?
cant make contact on the arm around. epitome of teen awkwardness
Great post Chess. Was tempted to take a position in July, after that massive gap up. It will likely stay within the 150-185 range for a few months.