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IBM breaks to multi-year lows

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Shares of Dow component International Business Machines (NYSE:IBM) $79.98 -2.2% have broken below its December 21, 2000 lows of $80.06 and have the stock looking further vulnerable to its current bearish vertical count of $69. Previous bearish vertical counts of $82 and then $62 signaled potential downside.

IBM Chart - $2 & $1 box

IBM's point and figure chart was actually a "study case" in OptionInvestor.com's annual renewal gift for a case study in how to perform bullish vertical counts and sector/stock analysis with the bullish % charts. Since IBM exceeded its bullish vertical count and we were warning bulls to snug some tight stops under the $119 level, it's been "declines-ville" for IBM. The "buy signals" of late have come during shorter-term market rallies. The "2nd bear count" combined with the current bearish vertical count of $69 (could grow with column of O) hint of longer-term lower prices.

We'd expect further bearishness in IBM to have a negative impact on technology bull's psychology and the stock should be monitored and understood. When the world's largest computer company is under distribution, this is often attributed to continued slowing in corporate IT spending and can have a negative impact on other technology stocks.

One "favorite" stock that bears like to short is Advanced Micro Devices (NYSE:AMD) $10.67 -3.43%. The company's management is long-kown for not giving analysts clear and accurate guidance with respect to earnings and also faces stiff competition from competitor Intel (NASDAQ:INTC) $24.46 -0.3%.

Advanced Micro Devices Chart - Daily Interval

AMD's point and figure chart is perhaps equally if not more bearish than that if IBM's point and figure chart. AMD recently gave a triple-bottom sell signal at $12.50 and has a bearish vertical count of $6.50 (could grow). The bar chart shown above with retracement and regression overlaid has a bear most likely shorting the stock with a tight stop just above the $11.75 level and targeting a short-term trade to 80.9% retracement of $10.05 or lower end of its regression channel at $9.30. The large volume spike from $14.82-$12.59 came on a downward move and hints that institutions may have "flushed" the more unpredictable semiconductor-maker from their holdings.

Jeff Bailey
Senior Market Technician
Option Investor

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