Is The Elephant Dead?


IBM was in the news this week, but not in a good way. Tech columnist and author Robert X. Cringely reported in late January of an upcoming massive layoff at IBM, saying 26% worldwide. If true, that would be more than 100,000 people. IBM, and some analysts, quickly denied that, and suggested any layoff would be much smaller (although IBM is taking a $600-mil charge). The layoffs apparently started this past week.

You have to be careful giving too much credence to possible ‘sour grape' comments posted on the web from ‘victims' of the layoffs. But in the past week, there have been a huge number of posts from current and former employees and customers on numerous websites. They all point to a company that appears to have severe problems with no improvement in sight.

The stock is back to early 2011 levels. The stock is down 25% since the new CEO took over in Jan 2012. From the numerous posts, and my own contacts with IBM employees, morale is at rock-bottom. IBM's fundamentals are declining.

The past two revenue and earnings announcements were below consensus estimates (correction: the most recent earnings report did beat expectations, but that is of little comfort). However, the new CEO is getting a $3.6-million bonus, a $13.3-million stock incentive award, and a 6.7% bump in salary. For more reading,…

Bob Cringely's original ‘IBM’s reorg-from-Hell launches next week' article

Bob Cringely's ‘Next Week's Bloodbath At IBM Won't Fix The Real Problem' follow-up

Michael Hiltzik's ‘Why you should care that IBM's CEO is grossly overpaid' article

Chart-wise, the stock has been having trouble closing above the 50-day moving average. Cycle-wise, the stochastics on the daily chart suggest IBM may have formed a short-term cycle high. I think the recent high of 158.71 may represent a short-term high, and another trip down into the low 150's is possible (unless something comes ‘out of the blue').

In today's Seasonal Forecaster, I cover a couple of ways to trade IBM, and present another trade candidate that may sell off after announcing earnings this morning.

(Disclosure: This week I will be selling my remaining amount of IBM stock, which I've had for decades)

By Gregg Harris, MarketTamer Chief Technical Strategist

Copyright (C) 2015 Stock & Options Training LLC

Unless indicated otherwise, at the time of this writing, the author has no positions in any of the above-mentioned securities.

Gregg Harris is the Chief Technical Strategist at MarketTamer.com with extensive experience in the financial sector.

Gregg started out as an Engineer and brings a rigorous thinking to his financial research. Gregg's passion for finance resulted in the creation of a real-time quote system and his work has been featured nationally in publications, such as the Investment Guide magazine.

As an avid researcher, Gregg concentrates on leveraging what institutional and big money players are doing to move the market and create seasonal trend patterns. Using custom research tools, Gregg identifies stocks that are optimal for stock and options traders to exploit these trends and find the tailwinds that can propel stocks to levels that are hidden to the average trader.

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