In this week’s Mullooly Asset Management video, Tom takes a look at the point and figure chart of IBM. IBM reported subpar earnings this morning (October 20, 2014) and also reported paying one of their competitors to take a division off their hands. Not great news. IBM is a large component of the Dow Jones Industrial Average, and its negative earnings news has put a damper on the index so far today (as of 1 pm).
As Tom mentions in the video, we get all of our point and figure charts from Dorsey Wright and Associates. If you’re interested in learning about point and figure we highly recommend you visit their website: http://www.dorseywright.com
Watch the video for an in-depth analysis from Tom. The point to take away is that before this morning’s earnings new, IBM was already in a negative trend. When stocks are in negative trends, bad things tend to happen. In addition to being in a negative trend, IBM’s chart is a sell signal. It’s displayed poor peer and market relative strength as well.
Point and figure charts help us to stack the odds in our favor when we invest. We typically look for investments in positive trends, on buy signals, that display peer and market relative strength. Is this a perfect strategy? No, but it helps us stack the odds in our favor.