This Expert Explains Why IBM Is A 'Great Trade'

Market Technician and Eagle Bay Capital founder JC Parets tracks the performance of the Dow Thirty stocks, looking into the companies every week. In the firm’s most recent Dow Thirty report, he analyzes International Business Machines Corp. IBM, and arrives to the conclusion that this is a great trade.

As it can be appreciated in the chart above, structurally, IBM broke down below its multi-year consolidation and continues to struggle, big time, with the S&P500. This is the reason behind the relative strength continuing to fall off a cliff, and hitting 6-year lows.

Eagle Bay explains that they had been waiting for a break below or above these converging trendlines to indicate the way to move next. However, with prices plunging, the firm waits patiently “for confirmation to trigger the next direction.”

Parets concludes, “In December we hit our downside target near 155.50 based on the 161.8% Fibonacci extension of the 2014 rally. We suggested selling into any strength towards former support near 172 as this is a broken market with momentum in a bad bearish range. We hit that level in the past few weeks. The measured move based on the size of the pattern over the last few years is 148 and I think we can ultimately see those prices. See daily chart for a more tactical approach

Bottom Line

According to the report, Eagle Bay has been doing “very well in shares of IBM” over the past few months. “After breaking down from that massive consolidation last October, prices hit our downside targets in December where we wanted to be covering shorts,” the analysts explicate. “After some consolidation we saw momentum putting in a bullish divergence and prices broke out of that range signaling a nice mean reversion rally to 172. We hit our upside target over the past week where we want to be taking profits and reevaluating in coming weeks/months. Great trade.”