Back in Jan. 7th 2012, half a year or more ago, we confidently predicted that IBM would not trade above $195. The actual high was $210,69, so we were wrong again. The argument then was that for most stocks the 3d wave is by far the strongest and longest, even if that is not an absolute requirement. Many exceptions exist but for the most part they occur with commodity related stocks, not with the IBM’s of this world and therefore it is reasonable to assume that a 5th wave will NOT be longer than a 3d wave. This still may be a correct assumption as it all depends on where you start the 5th wave. We had originally assumed that there was a triangle from 1999 to 2006. In retrospect it would seem more appropriate to assume a large flat all the way to 2008/9. This has the effect of pushing the starting point a little higher and making the 5th wave channel bound within a very narrow range. The speed at which the stock travels from one side of the channel to the other is the same for the 96 to 99 move and the 09 to 12 more recent one, both being about $100 in 3 years.  The very clear periodicity we pointed to earlier still applies when using the mid point of the B-wave (2006). Roughly every 6+ years this stock changes direction and loses at least half its value. The $210 high was probable such a turning point.

For most of the past century this company was probable best known to outsiders for its dress code. Dark blue or grey 3 piece suit, white and only white shirt and an unobtrusive tie. Now few people have any idea what they stand for or do. Even the, very heavy, electronic typewriter that seemed to grace just about every office has disappeared from the face of the earth.

Back on July 19th 2011 the chart on IBM suggested that the stock would not trade much above $193 ????.  Now , 1/2 year later this prediction can be refined. The stock will not trade above $194,90, a recent intraday high. Then and now the reasons are mostly the same. First of all we have reached the parallel trend-line that connects the lows of 2 and 4 and is drawn through the high of 3 (standard channelling). Secondly the stock exceeded the line drawn through the highs. And thirdly wave 5 is now equal to wave 3 and as 3 is usually the longest 5 can not go higher without violating that guideline. To that can be added the Mnt. Everest X2 effect and the interesting fact that , despite Warren Buffett’s professed agnostic view on all that is technical, he bought a nice chunk of this stuff and the stock immediately cratered about $10 but came back to a new high after that. Today the stock sits at $182

Curiously, if one cares for cyclical things, the stock has displayed a relatively stable cycle of about 12 or so years. Each time it peaks it suffers a loss of at least 50% or more. Assuming history repeats itself you are about to lose half your money; one needs a lot of faith in the oracle to put up with that. Also be careful not to infer that since this company is known as Big Blue, it is a blue chip stock, they simple do not exist anymore.

The book value per share for this stock is $18.91 according to Yahoo finance so this stock is trading at almost 10x book.

Definitely got this one wrong. It just kept going and going, but the last $30 or so up is just ridiculous and we now have perfect symmetry with the RSI not confirming. This is a sell. In my last blog I suggested the stock should not trade above $193, so far so good.

IBM reported excellent earnings which took the stock up by about $9 or 5%. The results may have been good but not that good. So the peak is in or almost so. Here are the short and long-term charts again;

See also previous blog. I reiterate that this stock is a sell.  Looking at the detailed chart on the right (click on it to enlarge) it has stayed within it’s channel for two years and more. Only today it “throws-over” if there is such a word. This typically is an exhaustion move.

Looking at the long-term chart it is truly amazing what this stock has done (after 25 years of doing nothing). The count shown may or may not be correct but even so we are fast approaching the point where wave 5 is equal to wave 3 (at about $193???). This would be highly unusual especially for a non-commodity stock. Waves 3 may not be the shortest and mostly are the longest. Ergo in all likely hood the stock will not trade beyond that point. I certainly would not wait for it to get there.