Welcome. The contents of this blog comprise my personal observations on the stock market from the perspective of using both fundamental and technical analysis by reviewing market data and stock charts based on the methodologies of William O'Neil of Investors Business Daily and his books, from Stan Weinstein's books, and most of all, through lessons learned over the years by listening to Gary Kaltbaum's "Investor's Edge" radio show on Business Talk Radio.

Criteria of stocks include first researching sectors to determine which are strong and which are weak using the ADX indicator (>40 = increased volatility); focusing in on a leading sector and buying leading stocks on a high volume
breakout (minimum 2x average) above a base; stock prices are higher than $25/share with daily average volume higher than 300K; positive and increasing PVT (indicating institutional ownership), positive and increasing RSI (indicating relative strength compared to other stocks in the market).

Please keep in mind that
I am by no means an expert, nor are my posts intended for anything other than to share my opinions of what stocks are doing for the purpose of getting feedback. Thus, please do your own research before taking action on what you read here. I will be adding posts on topics of interest as I learn about them.

Tuesday, July 29, 2008

IBM strong and steady.

I was watching IBD's analysis of the IBM stock. At the time they made the video, the market had not yet had a follow-through day, but nevertheless, they wanted to analyze IBM to show that once the market turned, that IBM would be a good candidate for a purchase in a new bull market.

This is how Investor's Business Daily (http://www.investors.com) analyzed the stock:

IBM has had good earnings growth and sales acceleration in the past 3 quarters (not 25% per quarter, but more modest which is still good because it's a monster company.) As is characteristic of very large companies, because of the sheer volume traded every day, IBM's stock typically trades in a very tight trading range.

Over the past few months, IBM was finding support above the 10-week moving average. In May, IBM pulled into a base pattern (on heavy volume) as the general underlying market started to drop. Heavy volume indicates that institutional investors are investing in the stock (meaning that they trust the stock) -- this is a good sign, especially in a bear market as we were in until today. The kind of base that IBM has been forming has been a "cup and handle" base with a high handle (which is fine for a cup and handle formation.)

When the stock breaks out of its base, instead of exploding to the upside as a smaller entrepreneurial stock would do, because IBM is a large company, it will likely move into a slower, but steady uptrend.

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