Next Week's Secret

Next Week's Secret

12:05pm (EST)

With all of the attention being focused on the financials this week, nobody is looking ahead to a huge event happening Monday. International Business Machines (IBM, $99.95, up $1.10) will be reporting earnings and I think they are going to produce a huge quarter.

The problem this week has been companies reporting great earnings and they are seeing their shares prices tumble. If there is one Tech company that is capable of keeping the market rally alive, it will be IBM. And what better company to bank on? Yes, the risk is that the company reports a blowout quarter, gives bad guidance, and the stock falls back to the low $90’s.

The other thing that I like is that there hasn’t been much chatter about the event and the fact that IBM recently backed out of its deal to buy Sun Microsystems (JAVA, $6.23, up $0.10). In fact, Sun is begging IBM to come back to the table.

I like the IBM May 110 calls (IBMEB, $1.00, up $0.10) at current levels.

It is scary to go long in a situation like this because everyone is calling for a pullback. And yes, we will eventually get one. But I still think it comes in May and it may not be as bad as people are predicting.

For those of you who have been following me for the last year, I am both a bull and a bear but I look for trades that are news before they are news. Dendreon (DNDN, $17.23, up $0.06) is a great example of finding hidden gems before Wall Street does.

Again, there is the chance of the stock falling back but last time IBM reported earnings the stock surged 10 points from $82 to over $91.

Rick Rouse
Rick@OptionsMentoring.com

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