Schaeffer's Market Observation Features IBM.CINCINNATI -- Today's Market Observation features IBM (International Business Machines Corporation, Armonk, NY, www.ibm.com) The world's largest computer company. IBM's product lines include the S/390 mainframes (zSeries), AS/400 midrange business systems (iSeries), RS/6000 workstations and servers (pSeries), Intel-based servers (xSeries) (NYSE NYSE See: New York Stock Exchange :IBM). Schaeffer's Market Observations are market-based reports that provide insight and analysis from a unique and unbiased perspective. Market Observations are published on www.SchaeffersResearch.com - the home of Bernie Schaeffer and Schaeffer's Investment Research. To receive a free email notification each time a new commentary is written about one of the featured stocks or any of your favorite stocks, click on the following link: http://www.schaeffersresearch.com/addinfo . IBM Continues to Struggle According to according to prep. 1. As stated or indicated by; on the authority of: according to historians. 2. In keeping with: according to instructions. 3. Hoover's, IBM (NYSE:IBM) is the world's top provider of computer hardware and is among the leader in almost every market in which it competes. The company produces desktop and notebook personal computers, mainframes and servers, storage systems and peripherals. Furthermore, IBM's service arm is the largest in the world. Regular readers of this space know that we employ an Expectational Analysis (R) investment approach that seeks out equities that have sound fundamental and technical backdrops but still have pessimism present in their sentiment background for potential long trades. On the other hand, we hunt for technically weak technically weak Used to describe a security or the whole market when technical indicators point toward a price decline. For example, small investors may step up odd-lot purchases of securities, the number of stocks hitting new highs may be small, and market securities with optimism in their sentiment backdrop for potential short trades. One such short investment opportunity that Bernie Schaeffer has capitalized on in his Expectational Analysis(R) is IBM. Bernie Schaeffer has held IBM in his this service since December 14, 2004, and has garnered a return of 8.4-percent on this position. Technically speaking, IBM has been in a steady decline since early March, shedding more than six percent during the past year. The shares are currently trading below their intermediate and long-term moving averages, a negative sign from a technical perspective. Click the following link to see a Weekly Chart of IBM since December 2004 with 10-Week and 20-Week Moving Averages: http://www.schaeffersresearch.com/wire?ID=14248 . Furthermore, the stock's relative-strength versus the S&P 500 Index (SPX (Sequenced Packet EXchange) The transport layer protocol in the NetWare operating system. Similar to the TCP layer in TCP/IP, it ensures that the entire message arrives intact. SPX uses NetWare's IPX as its delivery mechanism. ) has deteriorated since July 2003. Click the following link to see a Weekly Relative Strength Chart, IBM vs. SPX, since March 2003 with 10-Week and 20-Week Moving Averages: http://www.schaeffersresearch.com/wire?ID=14248 . Despite the stock's lackluster performance, it is viewed very highly by both Wall Street and investors. Financial analysts adore a·dore v. a·dored, a·dor·ing, a·dores v.tr. 1. To worship as God or a god. 2. To regard with deep, often rapturous love. See Synonyms at revere1. 3. IBM, as there are currently 16 "buy" ratings, two "hold" ratings, and two "sell" ratings on the equity. This configuration leaves IBM vulnerable to analyst downgrades on any negative developments. Neither option players nor short sellers have made big bets against IBM. Option investors currently hold 141,000 open calls compared to 97,000 open puts in near-term activity. The resultant Schaeffer's put/call open interest ratio (SOIR SOIR Schaeffer's Put/Call Open Interest Ratio SOIR Simultaneous Operations on Intersecting Runways ) of 0.69 is lower than 71 percent of all readings taken during the past year. A low SOIR percentile ranking indicates optimism, as option speculators hold relatively more bullish calls compared to bearish Bearish Words used to describe investor attitude. A bearish investor believes that a particular asset or the market as a whole will decline in value. bearish puts in the front three months of option activity. What's more, the SOIR remains in a long-term downtrend downtrend A series of price declines in a security or the general market. Many analysts feel that investors should avoid securities in a downtrend until the pattern is broken. Compare uptrend. , indicating that investors are increasing their bullish stance toward IBM. Click the following link to see a SOIR Chart of IBM since September 2003: http://www.schaeffersresearch.com/wire?ID=14248 . Short sellers have made negligible wagers against the security. The stock currently sports a meager mea·ger also mea·gre adj. 1. Deficient in quantity, fullness, or extent; scanty. 2. Deficient in richness, fertility, or vigor; feeble: the meager soil of an eroded plain. 3. short-interest ratio short-interest ratio A ratio that is used for market analysis and is calculated by dividing short interest by average daily volume. Technicians use the short-interest ratio as a tool to determine market direction. of 2.2 days, which accounts for less than two percent of its float. As contrarians, we like to see a healthy short-interest ratio in the midst Adv. 1. in the midst - the middle or central part or point; "in the midst of the forest"; "could he walk out in the midst of his piece?" midmost of an uptrend uptrend A series of price increases in a security or in the general market. Some investors believe a security tends to take on a certain inertia; as a result, these investors search for stock in an uptrend, thinking that it will probably continue to move in , due to the fact that the shares may benefit from a short-covering rally on any positive developments. Finally, IBM receives a weak rating of 2.0 (with 0 being the worst possible rating and 10 being the highest possible rating) on our proprietary Schaeffer's Equity Scorecard. Click the following link to see a Schaeffer's Equity Scorecard for IBM: http://www.schaeffersresearch.com/wire?ID=14248 . Considering the cheery cheer·y adj. cheer·i·er, cheer·i·est Showing or suggesting good spirits; cheerful: a cheery hello. cheer sentiment backdrop in the midst of the security's poor price action, IBM is likely to continue to underperform the broad market. Contrarian investors may want to seek out additional securities with inflated expectations and a weak technical backdrop to bolster short portfolio performance. The best way to take advantage of the timely Schaeffer commentaries is to sign up to receive their free e-newsletters -- Opening View, Market Recap and Monday Morning Outlook. Click here to have the Schaeffer's commentaries delivered to you free via email every day. http://www.schaeffersresearch.com/addinfo . About Schaeffer's Investment Research (www.SchaeffersResearch.com) Schaeffer's Investment Research, founded by Bernie Schaeffer in 1981, is a financial information and trading resources company. It publishes Bernie Schaeffer's Option Advisor, the nation's leading options subscription newsletter. The firm's contrarian approach focuses on stocks with technical and fundamental trends that run counter to investor expectations. The firm's website, http://www.SchaeffersResearch.com , is recognized as one of the leading information sources for stock and options traders and was cited as the top options website by both Forbes and Barron's. Click here for more details about Schaeffer's trading methodology: http://www.SchaeffersResearch.com/method . |
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