Monday, July 11, 2011

MarketWatch: IBM

Keep your eye on IBM. The shares have come screaming off the double bottom formed last July and August at the $120 zone. The company's shares have been trading in record territory ever since breaking $140 a share back in October. To me this both a long way up and a long time to be trading at record highs without a pullback.

In an economy and stock market addicted to stimulus crack I am suspicious that even the plunger protection team can keep IBM up in the stratosphere without a decent pullback of say one third the prior move. That is the first Fibonacci retracement.

In the 52-week chart you can see that 100 day moving average is providing excellent support for IBM. But notice how the 100 day moving average is flattening out, at $165. That is not the only thing that's flattening out. The stochastics are both way up in the stratosphere at 93 per cent and they are rolling over and turning down.

I don't know if IBM will crash here but if it does I want to be on board for the ride. Also IBM is to tech sector what Goldman Sachs is to the financial sector. That is an early warning indicator. In other words IBM could lead the tech sector and the rest of the market all the way down if there is a significant selloff this summer. But what is really interesting is that there is an event occurring today, which could could possibly lead IBM down.

IBM is not scheduled to report earnings until July 8, but Alcoa aluminum is reporting earnings after the market close tonight. If Alcoa disappoints it could be the catalyst to bring entire market down with it. If the market does crash, IBM doesn't have a semblance of support until at least $160.

All of this is just guesswork right now. I am not giving long or short entry points all I am saying is keep an eye on IBM.

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