IBM: Long Candidate

I shorted IBM for a scalp on Wednesday (see that posted, if interested) on the .618 opening gap retracement after the break of the short-term Double Top, but I covered for a dollar gain because, bigger picture, this daily chart is acting bullish.

IBM broke out of a Bullish Inverse H&S in December. The neckline has a severe downward slope, but what I liked about it was that the volume had the right look, and I particularly liked the successful retest (within five cents) of the neckline at the January 20 market low. That's called a trendline validation, telling us, "Yes, that trendline you've got IS SUPPORT, as it should be. Further validation of that came the next morning on the big gap higher, and upside follow-thru. Nice.


Currently, IBM is champing at the bit for a breakout of the pattern, which it did intraday yesterday. I played it long from 92.48, but threw it in for about a $180 gain when it looked like the breakout wasn't going to hold on a closing basis. It didn't. We're coming off SPX 803-804 resistance, so I didn't want to stay long on a possible "Fakeout/Breakout." but IBM is a stock that I will give strong consideration again on the long side if it looks like we're going higher.




Basis the Ichimoku Kinko Hyo chart, we can "See At A Glance...The Table of Balance" that IBM was bearish in the autumn, well below the Kumo (Cloud). That's the vertical lines. Coming out of its November low, IBM broke out of the Bullish Inverse H&S pattern and worked its way through Kumo (Cloud) resistance, then "walked down the Kumo (Cloud)" into the January 20 neckline retest low before banging higher "above the Kumo (Cloud)." I like how visual these Ichimoku Kinko charts are.

That rally ended in a Bear Flag, seen in the last chart.

Notice how the Kumo (Cloud) narrowed as IBM went into that Bear Flag high, then began to form a "rising cloud of support" as IBM sold off. IBM closed below it for only one day, on March 9, but it held above the February 25 low, turned higher, and now is champing at the bit (I always thought that it was "chomping" ... but, it's "champing") for a pattern breakout at the top of the Kumo (Cloud).

Finally, notice that while the general market went to a new low at the EVIL 666 (LOL), IBM remained well above its November low, showing very nice relative strength here.