Jim (cont'd):     

Alright, so today we are going off the charts to look at real household technology consulting names that have been tearing up the joint…

I am talking about IBM (IBM)…

According to Dan Fitzpatrick, my colleague at TheStreet.com, where I am chairman… Dan, a great technician who is our go to guy when it comes to analyzing the charts… he says IBM looks real good… the stock has been below its 50 day moving average… a technical term that tracks how close a stock has hugged its short term trajectory… okay, here we go… but now it is above that line… and now it is above that line… and even though the 50 day moving average is going higher… IBM’s pull backs have all ended above it… they are all hanging in there… now, that is the kind of thing that shows up on scans that traders use to find up trending charts… chart watchers want to own stocks that are as what is known as being above their 50 day moving average… and where that moving average is moving higher… as a closet technician you should know that I favor the 200 day moving average, harder to manipulate, I think more of a true measure of a stock… but remember I am not a technician, I am going to go with what these guys say.

Now in early October, IBM sold off on what was very, very large volumes… this is a little indicator of bottom, it just goes like this and then spikes okay… remember for technicians volume skips the Miranda warning and goes right to the polygraph… high volume means truth… it means a move is telling the truth… and low volume like what we had here, is lying…. then the stock hit its mid November low on heavy volume… okay, right here… but lighter than in October… so the volume here if you take a look was not equal to the spike here, that spike was more than that… since then … yes, this is what they think is important, I am just telling you what they think is important… since then IBM has been moving higher… that means according to the technicians that the stock has been dumped by everyone that wants to sell… and now the buyers are in charge… now look at the huge spike in the volume in mid January… that is the largest one… that coincides not with the sell off, but with huge rebound the next day… chart watchers would tell you that this is a sign of strength… where buyers completely overwhelmed the selling, and still wanted more… IBM closed at its intra-day high that day… indicating that they buying persisted throughout the day… another thing that they like to see… technicians will say that this is a fairly reliable indicator that the tide has turned and a stock is going higher.

Now, how would technicians tell if IBM would keep trending higher… look at what is known as the resistance line…. one of the first sign for chartists that a trend is in trouble is when a stocks current peak doesn’t run high enough to touch an existing trend line… that indicates to them that buyers are losing interest… losing interest in paying more… or the owners are becoming more willing to sell… IBM’s peak keep tagging that resistance line… meaning the trend should be in tact…. the problem with just looking at charts is that as soon as IBM stops being able to touch that line… when it rallies… the reason to own the stock evaporates… so you know what I am worried about… you would have bought high and sold low… that is a cardinal sin according to the cannon of all stock investing… at least according to REAL Money, the book, now available in paperback.

So, how about the fundamentals… is there a reason to own this stock based on the underlying business… and I think tech is going to be weak tomorrow… so focus, this could be the trade … I think there is a reason… in fact I think the earnings here are what is driving all of this technical go end trail reading… in other words you don’t need a Ouji board to know which way the wind blows… because that big spike in January that Fitzpatrick liked so much… right here… well, guess what… that is when IBM reported its monster good quarter… in an earnings season full of disappointments and full on implosions… IBM bucked the trend… beating the streets consensus estimate by .25 cents, and earning $3.28 in the fourth quarter… right there, that is what we got… the company said that it expects to earn at least $9.20 this year… .45 cents above the streets consensus…. between $10 and $11 in 2010... visibility… even though IBM’s end market looks weak… remember this company doesn’t make PC’s… and it is a company that saves other companies money… 75% of its new service contracts will deliver cost savings to customers… that is how it will thrive in this awful environment… everyone else is trying to cut costs… for that you turn to IBM… I also bet they will be able to take some share courtesy of the fallout of the mechanics scandal at Satyam… that is the Indian IT and consulting company, Satyam is the Indian version of Stanford, if not Madoff… this is not your father’s or even your older siblings IBM.. the company has $117B backlog, that is big, in its services business… IBM is now more of an outsourcing and consulting company than a traditional tech hardware company… it gets 80% of its revenues from services and software… and recurring revenue from these businesses make up for about half of IBM’s total revenue… we like recurring revenue because it can mean stability and it gives you visibility… IBM with around $13B in cash on the balance sheet is one of the few companies out there that can return money to you, a shareholder… pre cash flow is up 15% in 2008, to $14.3B… and the company is continuing to buy back stock aggressively… it repurchased 90 million shares, or $10.6B worth in 2008... it still has another $5.6B left in the buy back… and a little yield 2.1%, puny compared to the accidental high-yielders we like… it is still a pretty good tech stock… better yet, IBM has the cash to raise that dividend if it wanted to.

Bottom line…