WAY More Upside than IBM Stock
International Business Machines Corp. (NYSE:IBM) stock represents a juggernaut in the information technology space.
The company boasts a $150.0 billion market cap, and that is where my problem with IBM stock lies. Could IBM stock price double from its current level? Possibly, but how much higher can the stock price go before the market cap starts alluding to an obscene market value?
With that in mind, and my investment dollars in question, I want something more. I want something exciting with greater potential. I want a competitor like NetApp Inc (NASDAQ:NTAP).
A Better Bet than IBM Stock
NetApp Inc. (NASDAQ:NTAP) has a market cap of $9.67 billion, and is much smaller in comparison. The smaller market cap usually means that the name is less-known, and less-known names are less owned. Smaller cap companies allow for greater price appreciation compared to their bigger cap counterparts. I am not saying NTAP stock is in any way better that IBM stock; I just believe there is more upside potential with a company of this size in its ability to produce capital gains. The standout reason why I am so compelled to this name is that I am completely in love with the chart.
This IBM stock competitor has a price chart that is setting up something really extraordinary. The following chart illustrates the pattern in question.
Chart courtesy of StockCharts.com
A symmetrical triangle is a consolidation pattern that contains two converging trend lines: one upward sloping line that represents price support, and one downward sloping line that represents price resistance. The pattern concludes when one trend line is broken. These patterns are especially powerful because, as each trend line is touched and rejected, the position is building momentum.
Bulls and bears are fighting for position in hopes that their respective outlooks are indeed superior. When price does finally break out, one camp is proclaimed as the loser and is sent running, exiting, and covering their respective position. This action fuels the breakout.
The rarity in this pattern is apparent in its size. This triangle has been in development since NetApp shares peaked in the year 2000; the frenzy that was the dot-com bubble. The larger a pattern is in size and duration; the greater the reaction when share price finally breaks out of that pattern.
The initial targets will be either the highest or lowest points of the triangle. Therefore, a break lower would argue a move to $5.00, and a break higher would argue a move to $143.00. An upside breakout would represent a return greater than 250%; that type of potential is the excitement I was referring to.
The following chart illustrates another pattern embedded within the same chart.
Chart courtesy of StockCharts.com
There are two parallel lines that define this pattern. The pattern is known as an ascending channel. An ascending channel has two trend lines that define the upper and lower bounds. Share price oscillates between these two lines for as long as the trend permits.
Every time NTAP stock hit the lower bound, share price proceed to rebound until the upper bound was tested. The upper bound now sits in the mid 90s and represents a potential return greater than 150%.
Two bullish price patterns embedded within one another, with much higher price targets, are reason enough to get excited let alone bullish on this position.
The Bottom Line on IBM Stock
I like IBM stock, and I like the information technology space, but if I am going to commit capital I want something a little more exciting, with the ability to produce substantial capital gains. I don’t believe that IBM stock presents that opportunity at this juncture, but NTAP stock does. I like NetApp stock simply because the price chart is setting up a bullish objective. Giant technical patterns have presented themselves and a resolution to the upside presents an opportunity of tremendous proportions.