Strong Bullish Reversals off the Lows for Cisco CSCO and IBM

Feb 22, 2016: 12:14 PM CST

Technology sector Dow stocks Cisco (CSCO) and IBM have been strongly downtrending into 2016.

However, like October 2015, we’re seeing impressive reversal bounces in these stocks.

Let’s chart the reversal and plan the pathway ahead for these giants:

Shares of IBM have been strongly downtrending since the early 2013 peak above $210 per share.

Price traded under $120 at the beginning of 2016 as price carved a similar “Double Bottom with Divergences Pattern” like we saw near the beginning of October 2015.

In fact, the broader S&P 500 forms a similar pattern (and comparison) as I wrote earlier this morning.

In October, shares powerfully reversed “up away from” the $137.50 pivot through the falling 50 day EMA (blue) but stalled just shy of $150.00 per share.

Will this time be different with an extended breakout toward $140 or higher… or will we see the same reversal?

Focus on the $130.00 price pivot level as your “bull/bear” battle line (bullish above; bearish beneath).

Let’s chart Cisco (CSCO) which shows a stronger impulsive reversal rally:

A similar “Double Bottom on Positive Divergences” not surprisingly developed through September 2015 ahead of a powerful reversal rally in October.

At the time price was so strong that it power-rallied toward – then through – the 200 day SMA (red).

Shares eventually reversed on negative divergences into the $29.00 per share level, continuing the downtrend.

We’re now seeing a very similar “Double Bottom/Divergence” pattern with strong impulsive rally into the falling 200 day SMA once again.

What’s next?  Compare the October pattern and rally above the 200 day SMA with the current pivot into $27.00 per share.

Additional upside action – should it occur – targets $28.50 at least.

Otherwise, $27.00 is our confluence pivot target – achieved – which could set the stage for a swing lower.

Use these levels and logic with the indicators and methods you’re using.

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Corey Rosenbloom, CMT
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