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IBM (NYSE-IBM) Elliott Wave Forecast and Analysis - 160222
Welcome to a historical yet timely analysis of International Business Machines (IBM). On February 22, 2016, our Elliott Wave count identified that IBM was concluding a multi-year correction, setting the stage for one of the most powerful structural rallies possible: a major Wave III. This report dives deep into why the bottom was called, the immense target set, and, crucially, how the subsequent nine years of price action validated — and then complicated — the initial thesis.
If you recall the technical landscape of early 2016, sentiment around IBM was low. However, the price action was telling a classic technical story. The long-term correction, labeled as Blue Wave II, appeared to have finalized its descent at a low near $116.90. This level wasn't arbitrary; it was the confluence of two highly significant Elliott Wave and Fibonacci rules.
The Classic 61.8% RetracementThe final low registered just below the crucial 61.8% Fibonacci retracement level. This specific depth is a highly reliable feature for a Wave II correction. The market often dips slightly past this golden ratio to execute what traders call a bear trap — capturing late sellers and exhausting the bearish momentum before snapping back aggressively. Hitting this target signaled that the stock had structurally reset, had wrung out all the weak hands, and was fully primed for a new major advance. This structural completion was the bedrock of the entire bullish forecast.
The most significant implication of the Wave II completion was the structural launch into a major bull market, specifically labeled as Blue Wave III of Red Wave III. This "stacking" of two third waves is considered the sweet spot for technical traders.
The Psychology of Wave IIIIn Elliott Wave theory, Wave 3 is universally the most potent, directional, and least-volatile wave in terms of sustained upward momentum. When a smaller Wave III launches within a larger Wave III, it signals a period of explosive growth driven by high confidence and institutional money flowing in. This phase should not be choppy or indecisive; it represents the market aggressively pricing in the success of IBM's long-term pivot toward cloud and cognitive computing initiatives (like Watson and Hybrid Cloud services).
Based on the length and scale of the preceding Wave I, the upside potential for this new Blue Wave III was projected to be massive. The long-term ideal target for the completion of this wave sequence was set at $300 and beyond. This forecast was not for a quick speculative move, but a structural roadmap for IBM’s market capitalization over the next major cycle, expecting the stock price to eventually reflect a fundamental shift in the company's value proposition.
Original 2016 Trade Plan Summary
| Trade Thesis | Key Level | Initial Target (Wave 1 of III) | Long-Term Target (Wave III) | Critical Invalidation |
|---|---|---|---|---|
| Major Long Position | Low near $116.90 | $172 / $200 | $300+ | Sustained move below $116.90 |
Technical analysis is only valuable if its forecasts are subject to rigorous review. Did the $300+ structural forecast hold, and what can we learn from the intervening years?
Initial Success and the Stall (2016-2019)The initial call was remarkably accurate: the actual final low hit $112.57 on February 11, 2016, confirming the Wave II bottom. The stock then quickly rallied, surpassing the initial short-term target of $172 and peaking at $182.80 in early 2017. However, the anticipated straight shot to the $200 psychological barrier—and onward to $300—never materialized. Price action stalled, and the momentum required for a powerful Wave III vanished.
The Invalidation Point (2020)The true test of the forecast came during the COVID-19 panic in March 2020. The stock dropped to a low of $94.22. This was the moment the original, simple Wave III structure was technically invalidated, as the price broke decisively below the $116.90 low (and the $112.57 actual low). The move signaled that the market was in a much more complex, multi-year corrective pattern (likely a W-X-Y or a large triangle), forcing prudent traders to exit the original trade and reassess the long-term count.
Actual Outcome (2016 - 2025)
| Event | Date/Year | Price Action | Conclusion on Wave III |
|---|---|---|---|
| Actual Low (Wave II end) | Feb 2016 | $112.57 | Initial bottom call validated. |
| Initial Rally Peak | Feb 2017 | $182.80 | Initial $172 target surpassed. |
| Structural Invalidation | Mar 2020 | $94.22 (Broke low) | Original aggressive Wave III path failed. |
| Ultimate Target Achieved | Nov 2025 | $306.38 (Current) | Long-term $300+ structural potential confirmed, but highly delayed. |
The Great Lesson from the IBM Chart
"Elliott Wave identifies structural potential, but a confirmed invalidation—breaking the critical stop-loss—requires absolute discipline to protect capital, even if the ultimate target is eventually reached years later."
Crucial Risk Management Advice
Crucial Advice: Effective trading is based on disciplined risk management, not prediction certainty. Always use a firm stop-loss to protect your capital. Macroeconomic news, particularly from the Federal Reserve or the European Central Bank, can override any technical pattern instantly.
About the Author
Ghulam Muhiuddin, Certified Technical Market Analyst
Experience: This analysis reflects the insights gained from 18 Years of consistent market analysis and forecasting, specializing in the application of the Elliott Wave Principle and advanced technical structures.
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