Props to Intel, Now Sell It: Bizarro World in the Tech Space

After the bell Tuesday both IBM (ticker: $IBM) and Intel (ticker: $INTC) reported earnings. Both beat estimates and then IBM, who’s chart has been stellar lately, fell over 2%, while INTC, who’s stock price has been ‘resting’ since 2001, jumped over 5%. The only explanation that can cover this comes from an episode of Seinfield (below). But this sets up an interesting scenario between the two stocks.

The ratio chart above of IBM vs INTC shows that it has been in an uptrend since April 2010 with a couple of hiccups along the way. It conforms nicely to an Andrew’s Pitchfork and has been tracking towards the Median Line for several months. It has also recently moved higher over the 138.2% Fibonacci extension of the move from April 2010 to October 2010 at 8.32, but fallen short of a measured move target of 8.73, comparing to the move from April 2010 to October 2010. The trend is higher and looks higher.

The moves after hours however puts the ratio back down near 7.75 (the star on the chart). This would be a significant reversal if it holds up in regular trading on Wednesday. It would be outside of the lower Bollinger band, below the rising 50 day Simple Moving Average and below the Lower Median Line. Bizarro World or a Reversal? I am betting on Bizarro World.

Trade Idea: on a hold over 7.51, Buy IBM and Sell INTC looking for the ratio to move higher to 8.01 and then 8.32.

As always you can see details of individual charts and more on my StockTwits feed and on chartly.)

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The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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