Stocks This Week: Sell IBM Short And Buy Xerox

The current market correction is due for a short bounce to the upside. The rally is likely to be an oversold bounce into May. Expect a pullback to follow that rally followed by another decline from late May into late June. These moves are likely to complete the second quarter correction. Higher prices are then expected to yearend.

IBM
IBM
is due to report earnings this week. First, note in the monthly graph below that the stock is as overbought as it was in 2013. The weekly graph of momentum is also very overbought. Seasonally, April has been a high followed by two weak months as can be seen in the second chart. Lastly, the weekly price cycle tops this week at the time when the company is set to report. This suggests that the report will be met with selling. A decline to at least $160 is likely.

IBM Monthly

IBM Monthly Histogram

IBM Weekly Price Cycle

Xerox also reports in the coming week, and this report is likely to lift the share price. The daily bar chart below shows a flat stock. Momentum and relative strength have been neutral. The monthly price cycle in the second chart suggests that this range is about to end. Note that the cycle bottoms as earnings are reported. This implies a rally closer to $18 per share. Note that six of the last seven such signals have been profitable.

Xerox Daily