IBM's well oiled wheel could be about to drop off – Take 2
Background: IBM International Business Machines Corporation Technology | Information Technology Services | USA
International Business Machines Corporation provides information technology (IT) products and services worldwide. The company's Global Technology Services segment provides IT infrastructure services, such as IT outsourcing, integrated technology, cloud, and technology support services. The company was formerly known as Computing-Tabulating-Recording Co. and changed its name to International Business Machines Corporation in 1924. The company was founded in 1910 and is headquartered in Armonk, New York.
Technology & Nearest Competitors by service and market cap:
Technology Sector (XLK) - appear to have major wave 3 top in 2000 from which it declined into wave 4 low in Oct 2002.
Since then it seems to have formed a rising wedge of 3-3-3-3-3 (ending diagonal) wave 5 which has stopped short of making new high over 2000 top hence a failure or truncated wave.
OR since 2000 top it has formed just w, x and could be about to form y to the downside.
Either way a significant decline in XLV is anticipated.
IBM is part of Technology sector with hard to find direct competitor though several have some area of overlap and many of these are also in process of topping
Summary of Technicals:
Monthly Chart –
1. April 2013 top seems to have completed larger 5 wave since 1974 low (which might also mean a much larger cycle completion from 1932 on Dow Ind), a normal retracement could be anticipated and based on Elliott wave guide line the target area would be wave 4 of one cycle degree lower ie $70 zone in due course in this case.
2. MACD having dropped below zero line now upon bounce it is about to find it as resistance.
Weekly Chart –
3. We have 50% retracement of the initial decline from all time high and bearish 200 MA in proximity. The price attempt to move above falling shorter period MAs is about to fail and all MAs on the chart could make bearish alignment.
4. MACD is about to cross bearishly with possible convergence with ADX.
5. Price bounce on the trendline in proximity of 200 MA on weekly and have hit a resistance at $261 also under 20, 50 and 100 MAs.
6. If above holds then anticipating initial drop around $120 zone and may be $100 area.
Conclusion:
After a major 5 wave cycle completion over several decades it is likely to spend considerable time retracing and initial target of $120 and then $100 are achievable.
Action: Could consider either buying just PUT OR a PUT spreads as detailed below
PUT Spread Trade - Not recommended due to wide Bid/Offer spread.
Single leg:
Trade 1) Jan 2017 PUT with strike price of $100 being quoted at $0.41 - $0.47
A fill around $0.40 or better would be preferred on any bounce during the week.
Upon a price drop to $130 would value options around $2.0+
Trade 2) Jan 2017 PUT with strike price of $130 being quoted at $1.91 - $2.0
A fill around $1.90 or better would be preferred on any bounce during the week
Upon a price drop to $130 would value options around $9.0+
Warning: This is my interpretation of price action using TA approach that I consider helps me the most but could be completely wrong. Therefore as always, please do your own analysis for your trade and risk management. You should follow this on Paper Trading Account till you feel confident to apply the skill to a live account.
DanV
danv-charting.com
International Business Machines Corporation provides information technology (IT) products and services worldwide. The company's Global Technology Services segment provides IT infrastructure services, such as IT outsourcing, integrated technology, cloud, and technology support services. The company was formerly known as Computing-Tabulating-Recording Co. and changed its name to International Business Machines Corporation in 1924. The company was founded in 1910 and is headquartered in Armonk, New York.
Technology & Nearest Competitors by service and market cap:
Technology Sector (XLK) - appear to have major wave 3 top in 2000 from which it declined into wave 4 low in Oct 2002.
Since then it seems to have formed a rising wedge of 3-3-3-3-3 (ending diagonal) wave 5 which has stopped short of making new high over 2000 top hence a failure or truncated wave.
OR since 2000 top it has formed just w, x and could be about to form y to the downside.
Either way a significant decline in XLV is anticipated.
IBM is part of Technology sector with hard to find direct competitor though several have some area of overlap and many of these are also in process of topping
Summary of Technicals:
Monthly Chart –
1. April 2013 top seems to have completed larger 5 wave since 1974 low (which might also mean a much larger cycle completion from 1932 on Dow Ind), a normal retracement could be anticipated and based on Elliott wave guide line the target area would be wave 4 of one cycle degree lower ie $70 zone in due course in this case.
2. MACD having dropped below zero line now upon bounce it is about to find it as resistance.
Weekly Chart –
3. We have 50% retracement of the initial decline from all time high and bearish 200 MA in proximity. The price attempt to move above falling shorter period MAs is about to fail and all MAs on the chart could make bearish alignment.
4. MACD is about to cross bearishly with possible convergence with ADX.
5. Price bounce on the trendline in proximity of 200 MA on weekly and have hit a resistance at $261 also under 20, 50 and 100 MAs.
6. If above holds then anticipating initial drop around $120 zone and may be $100 area.
Conclusion:
After a major 5 wave cycle completion over several decades it is likely to spend considerable time retracing and initial target of $120 and then $100 are achievable.
Action: Could consider either buying just PUT OR a PUT spreads as detailed below
PUT Spread Trade - Not recommended due to wide Bid/Offer spread.
Single leg:
Trade 1) Jan 2017 PUT with strike price of $100 being quoted at $0.41 - $0.47
A fill around $0.40 or better would be preferred on any bounce during the week.
Upon a price drop to $130 would value options around $2.0+
Trade 2) Jan 2017 PUT with strike price of $130 being quoted at $1.91 - $2.0
A fill around $1.90 or better would be preferred on any bounce during the week
Upon a price drop to $130 would value options around $9.0+
Warning: This is my interpretation of price action using TA approach that I consider helps me the most but could be completely wrong. Therefore as always, please do your own analysis for your trade and risk management. You should follow this on Paper Trading Account till you feel confident to apply the skill to a live account.
DanV
danv-charting.com
