Stock to Sell #2 – IBM (IBM)
“Big Blue” is the bluest of the blue-chip technology giants. Its global capabilities in information technology, software, computer hardware and related financing make it a household name. But IBM (IBM) is a company in full maturity, so future growth must result from strong trends in emerging markets, improved profitability in its more developed markets, and cloud computing. S&P expects a 4% decline in revenues in 2013 and earnings of $16.91 per share, down from an earlier estimate of $17.38.
The stock topped near $215 in May, beginning a series of declines that then created a series of new lows after rallies failed to penetrate the overhanging 50-day moving average. In October, IBM broke to a low at about $173 on a high-volume continuation gap. It is again running into its 50-day moving average, now at $184, and appears to be turning from it again.
Traders should sell IBM short with a target of $184 and a stop-loss at $190. Long-term shareholders should protect their positions with defensive options strategies.