Hard to ignore IBM

IBM is a core short trade we have been in, some all the way, some partial positions and looking to add on the double top, yesterday after the bell IBM disappointed and is paying for it today.

This puts the core equity model portfolio short at a 4+% profit in essentially a day. I'd like to have added at better prices, that doesn't look to be a high probability, but I can still add at hopefully better prices than where we are now.

So lets take a look at the IBM charts-another company that is showing through earnings that valuations are just way too high for most people to feel comfortable buying up here, QE-3 or not.

 IBM's double top and today's gap down, I'd imagine we'd see some sort of effort to fill part of the gap, that's what I'll be on the lookout for.

 Just from implied measurements of the price pattern, $150 seems like a very reasonable target, although if things slip badly then reasonable goes out the window and I think there's a high probability of that happening. Just like the emotions that move the market, the market itself is like a pendulum in that it swings way too far one way and way too far the other, so a target below $150 is completely reasonable and possible, although it will take some time and that is why these are core positions and in equities and not leveraged products or options.

 This is what I was hoping for, in all seriousness though, the added price move wouldn't have done much to the big picture. The gap down "thus far" is showing a star, which is like some short term balance or equilibrium. How the 3C chart develops from here will determine the course of action for adding, but this is an excellent example of why we often phase in to positions and leave risk management wide on initial positions.

 IBM's 60 min chart shows the double top's deterioration to a leading negative divergence, this is part of the reason the initial short was entered.

Even near term IBM hasn't looked great, maybe now that price is closer to the short term 3C indication we may see some gap filling.

Congrats to the IBM shorts, particularly those who added yesterday before earnings. When a stock looks this bad on longer term charts, it's just a matter of time.