SELL ALERT: IBM
19th October 2018 |
IBM is a world leader in developing artificial intelligence systems and is a pioneer in developing quantum computing. However, it also has a large legacy workforce and a sizeable hardware component.
The earnings call on Tuesday highlighted the company is having difficulty meeting its sales targets as it struggles with the competing needs of its many business units. It dropped through the $140 level, which I have been watching as an important area of support. The risk right now is that it will at least test the $120 area, but more importantly any semblance that it was building support has been dispelled by this breakdown. Therefore, I recommend selling IBM.
If we turn our attention to the wider portfolio. There has been a great deal of volatility over the course of the last couple of weeks and a substantial number of shares are now back in the region of their respective trend means. These represent key levels of potential support where we need to see demand return to dominance in order to continue to hold the positions.
While there is a great deal of commentary circulating about the threats to the market, it is well to remember that we are in October. This month historically finishes in positive territory more often than not, but is by far the most volatile month of the year. It is almost normal to have volatility and we have certainly seen that in spades. Nevertheless, the fourth and first quarters of the year are generally the most benign for markets and I see no reason why this year should be any different.
If we are to look for one powerful catalyst which could turn investor sentiment back to a bullish outlook, it would be substantive action by the Chinese government to support its markets. It began talking the market up today but a firm order for the nation’s sovereign wealth funds to start buying would likely have a transformative effect on sentiment globally.
Action to take: sell IBM
Ticker: IBM US
Price recommended at: $153.33
Last close (as at 18/10/2018): $130.55
All the best,
Eoin Treacy
Investment Director, Frontier Tech Investor
