- Fibonacci Time series shows a confluence for a potential buying opportunity in 2017.
- A 10 year cycle also commences in 2017.
- Just because IBM appears to have a high probability signal, it doesn't mean you bet the farm.
International Business Machines Corp. (NYSE:IBM) stock continues to fall. The question in everyone's mind is when will "Big Blue" rise again? From fundamentals to technicals, you have everyone making up hypotheses with no sounding logic. There is a tool, and just like every tool it has its flaws. I am speaking of the Fibonacci time series. If you are familiar with the regular Fibonacci retracements and extensions, the Fibonacci time series tool is used in the same way. Except now we are focused on turning points in time, not where price may hold.
Also read: 3 Key Reasons To Buy IBM Stock
Take a look at the chart below for IBM stock.
I do not like to get crazy drawing Fibonacci lines all over the chart. For me two swings are more than enough, otherwise, you run into analysis paralysis.
Looking at the three-year weekly chart for IBM stock, the largest swing produces a time swing at the 50% interval which is Jan. 12, 2017. We want additional confirmation because any of these levels can hold. The next swing I use is the obvious swing high from the center of the chart. Interestingly, the 127% level is on Feb. 2. 2017. Typically, a majority of the moves terminate around these levels. So, to have the 50% level of the larger swing coinciding with the 127% level of the smaller swing creates a confluence effect. Currently, the trend is down, so expect a reversal around the January- February time-frame of next year.
I know some of you may be skeptical, so I will show a few examples in the past to prove to you that this works.
Looking at the past, was there a way to know a when a major bottom was in? Sure there was. If you noticed, that 127% time extension gave you an indication to be prepared for a turning point. It is in your best interest to watch for these 127% extensions when they occur in conjunction with other Fibonacci levels. You can gain great accuracy in your investing.
Even on the monthly chart, the 61% of the larger swing coincides with the 127% of the smaller swing. The confluence indicated a major turning point which occurred at the beginning of 2016.
Now 2016, in general, has not been a good year for stocks. However, there is such a thing as 'cycles' in the market. According to Larry Williams, there is a 10 year market cycle. In each of those years, the market acts in a highly probable way. In years ending in seven, the market tends to bottom before they rise again. So now we have even more confirmation: the time cycle confluence and the 10 year stock market cycle.
It is important to keep in mind that even though I say, with a high probability, that IBM stock will have a buying opportunity in early 2017, it does not mean it is going to definitely happen. That is why I stress that one should always keep a stop-loss in place. If you bring strategic management theory into play, you will understand what I mean. IBM is currently going through a restructuring phase because smaller innovating companies disrupted its business. Because IBM has been in business for over 100 years, its process is pretty much set in stone. It is very difficult for an incumbent firm to compete with disruptive firms because incumbents fear losing its largest customer revenue stream. Unfortunately, the focus on current customers is what leads to the demise of large, legacy firms. I am not saying this will happen to IBM, but this is something to keep in the back of your head for future reference.