IBM: Big Blue's Bounce Should Begin Soon

 | Jul 25, 2017 | 2:00 PM EDT
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If you missed the opportunities to exit IBM (IBM) this year near $170, as our objective DSE (decision support engine) warned both in January and April in these pages, it's no longer the time to use selling actions in this stock. After the past six months of decline, nearly from the day we warned on Jan. 16, 2017 that "IBM Should Be Sold This Month," the slide from the $180 level is exhausting itself into the current price zone surrounding $142 +/- $4.

By reviewing those two analyses, you can re-acquaint yourself with some of the indicators that causes the DSE to forecast approximately when the current trend is ending, and when and where the upcoming trend is about to get to -- allowing probability-ranked outcomes to be identified, and entry and exit points calculated.

From that pink sell box above $170, DSE forecast a trip to the green oval initially, with the lower green box eventually. Regardless of what external events are "linked" to this decline, the market made its intentions known to our DSE months ago, and continues to do so. Now the market shows the footprints of a decline at near-term termination. Therefore, a bounce is now due from these low $140s toward the mid-$160s, with more bullish potential thereafter.

For now and the next three to five, perhaps even eight months, while the monthly bar chart above allows more room for price to decline a few more points, the intermediate- and short-term degrees of trend (not shown here) are flashing warnings to use buying actions to cover profitable shorts, and/or use protective buy stops at $147 to ensure these great profits don't evaporate. This is the DSE Alerts message that went out to members of our Trading Room yesterday, which you can try for free by clicking this link.

In the next three to five months, as IBM undergoes a corrective bounce, perhaps into $165 +/-$5 (which includes typical Fibonacci retracement measurements), the short exposure that should now be exited or protected can be re-established, if DSE senses that the bounce has matured.

On the other hand, if you have been painfully "long and wrong" from the high $170s, and are thinking about throwing in your white towel on Big Blue, this is not the time to sell. No, this is when objective buying should take place. Therefore, if you can, hold or add to long exposure, awaiting the $160 to $170 zone to sell, or at least check with the DSE's nose for trend direction change.

If only the $160 area is reached in the next few weeks, then odds will quickly climb well above 50% that the next wave lower in IBM is beginning. Once that happens, DSE forecasts that the $125 +/- $3 zone will be probed, with growing probabilities of a test of $110.

Combining the long-term degree of trend above, with the intermediate and short term degrees of trend, forms a battle plan for the coming year as follows (note, the sell signal around $170 was far stronger than any buy signal here): Use these low-to mid-$140s as your "Y" in the road to take profits on shorts, and $147 or higher as a buy stop level before IBM potentially rises into the resistance zone mentioned herein.

Then, use the $120 +/-$10 zone in the coming year to prepare to back up the truck and accumulate shares of IBM, as some new business prospect comes online around 2019/2020, which catalyzes this company to its next upside target in the low $200s. Remember, the current buying signal is only to cover shorts, not establish longs, as the downside is still too dominant for the rest of this year.

For updates on this analysis, as well as other trading opportunities, try Ken Goldberg's DSE Alerts service for free for a couple of weeks, or contact him at support@dsetrading.

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