IBM Stock Trading Journal with VantagePoint

VantagePoint Trading Software is a forecasting tool that uses both end of day data and artificial intelligence to provide traders a forecast of market movement. These forecasts are 1-3 days in advance and help traders improve their timing on making trades and maximizing profit potential. The artificial intelligence software forecasts market movement for stocks, futures, Forex and ETFs. IBM, IBM stock, is in focus today…

This journal entry looks at the recent market movements of IBM. NYSE: IBM

VantagePoint Trading Journal IBM Stock

The markets got their first exposure to the Fed Chairman Jerome Powell speaking to Congress. Mr. Powell said that for now the Fed is sticking with interest on excess reserves.

“We have not made a decision in the longer-run whether that will continue to be our framework or if we’ll return to something more like before the crisis,” said Powell. “This is not a near-term decision” and “our current approach seems to be working well.”

The markets took this basically in stride shedding off a bit of some overnight gains in early Tuesday trade. To better see how this affects each market, we’ll use VantagePoint.  We can use the artificial intelligence forecasting software to analyze markets at all levels. Whether you are looking for individual stocks, futures or ETFs, stock sector rotations, or broad indexes like the S&P, Dow, and the Russell, VantagePoint can easily compile that data. I will be willing to look at a play to the upside.  Let’s look at IBM (NYSE: IBM).

image of IBM stock trading diary with VantagePoint
VantagePoint recently indicated a potential upside breakout in IBM due to a bullish crossover on 2/26/18.

Using the predictive indicators embedded within the VantagePoint platform and its predictive AI technology, we will point out two significant things. We have a bullish crossover indicated by the blue predictive indicator line crossing above the black, simple 10-day moving average on 2/26/18. We can combine that with the VantagePoint propriety neural index indicator moving from the RED to the GREEN position a full two trading days before back on 2/23/18. This indicator measures strength and weakness for a 48-hour period. The move to the GREEN position indicates strength and further makes the case for a potential bullish scenario. That’s why one could consider entertaining a setup to the upside.

Strategy Discussion

If one traded straight stocks, simply buying IBM stock in the $157.90 area could prove to be prudent. You are anticipating a move to the upside. It’s also a conservative way to enter IBM without the limitation of time associated with other strategies. In this scenario, it would also be good practice to place a sell-stop order in the $154.00 area to mitigate potential losses.

For more active traders with a shorter investment time horizon, you can consider a setup utilizing options. Given the market conditions outlined above, taking an active, premium debit approach may be the best path to success.

Because of the reasons given above, the purchase of a debit call spread may be one way to approach this situation. The first thing that you want to determine is your target price. You need three pieces of information to complete this calculation:  current price, expiration date and at-the-money volatility for that timeframe. This calculation yields a target price of approximately $162.50.  One could consider the potential opportunity of the March regular monthly expiration 160/162.50 call vertical paying $0.75.  This has a maximum risk of what you paid for the spread or $0.75.  The maximum reward is the width of the spread less any premium paid or $2.50 – $0.70 = $1.80.  This gives us a reward to risk ratio of 2.57:1.

Given the trading and market environment outlined above, a trader must evaluate whether this reward/risk ratio is appropriate for his/her risk tolerance.

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