Here’s how you top tick IBM. (October 19, 2017)
IBM
I want to look at IBM ( NYSE:IBM ) today. Here is why: We are going to look at the things that we need to see in order to top tick this for selling. First of all, yesterday the stock gapped up over 7 percent after good, strong earnings. This was in a volatility squeeze and that is important. Really important that when a stock is in a volatility squeeze like IBM ( NYSE:IBM ) the move can be pretty explosive and that is what this was. It gapped up and then it kept moving, just stayed up there during the day. If you shorted this stock into the open you are not happy, you are still not happy. The stock is up yesterday and then today it is up again.
Now, notice where it is relative to this third standard deviation Bollinger Band indicator here. It is above that, still, for the second time in a row. It is kind of like a law of math that it is not supposed to do that. So the upper Bollinger Band is running like crazy trying to catch up with the price. This is not supposed to happen but it did. Volume still twice average volume but NOTHING compared to what it was back here. It is like 30 percent of what the trading volume was yesterday.
So what do we do? Do we short IBM ( NYSE:IBM ) now? Under the 3-Day Rule the real smart money buys on the first day, that is the most powerful. The semi-smart money buys on the second day, that is not quite as powerful but still, there is a lot of capitalization there. And finally, the lowest common denominator, retail traders buy on the third day, so that is when we short the stock. Could be. Maybe so.
What I would suggest doing, though, is this: Here is what we are looking at, we look at this 161.25 level. I am going to set a personal alert here for me, one day is fine (I will know what that means). So we set that. That tells me that the stock is on the move again. Then we set another alert at 161.43. That is to tell me that the stock is, in fact, hitting an all-time high. If it does that, then we wait. We wait because the stock is obviously going higher, there is literally nothing to do.
If, however, the stock fails, like tomorrow morning I am talking about, it would be wonderful if it could gap up a little bit, but then ultimately fail here. Because what we want to be doing, if the stock just continues to run, again, don’t do anything. But if the stock does come up here and then start to roll over, maybe it just starts to roll over from here, whatever, it is not that big a deal. Then what you would want to do is, you use the top here, 161.43, you use that as a reference for your stop level and then you put a stop, a buy stop just above 161.43. I would put it at 161.55, something like that.
If you do that and the stock performs, again, it just has to fail right up here or again, even right here. If it fails there then you go ahead and short the stock. You have got a stop just above this level and then we will zoom out to the daily chart again. And so what are you doing? You are playing the odds. You are giving this stock a chance to kind of settle down. It could continue to rally tomorrow, I don’t think it will because it is just so far extended. How are you going to get more buying pressure to keep pressing the stock up when the stock in two days is up 10 percent or so, almost 10 percent. That is a time for traders to start taking profits. So use this 161.43 as the key for placing your stop. As long as the stock does not get above that level then you can go ahead and short the stock.
Free Chart