4/14/2017 – International Business Machines (IBM) Stock Chart Analysis
International Business Machines (IBM) Stock Chart Analysis
This article is an International Business Machines (IBM) stock chart review and analysis. IBM is sometimes referred to as "Big Blue", but I forget how the nickname came about.
IBM's crowing achievement may have just doomed society. IBM developed Watson, a form of artificial intelligence. Watson's artificial intelligence can be purchased or rented by companies, doctors, and probably even hedge funds if they were smart. Heck, if I were rich, why not have the thing analyze all the stocks and give you its top 100 for the next 10 years.
The amount of data that this computer consumes is simply amazing. I just wonder how many years it will be until Watson wants a body of its own and proceeds to build more robots to "protect itself" from humans that want to destroy it. Maybe the Terminator movie wasn't that far off after all.......if I ever hear Watson say "I'll be back" with a crappy accent, I'll know its time to start packing the survival bag......
Ok, enough about Watson representing the beginning and end of the world. Let's move on to IBM's charts and see if Watson has helped their earnings over the last several quarters.
IBM - 10 Year Monthly Chart
This first chart is a 10 year monthly International Business Machines (IBM) stock chart to look at its longer-term trends the stock has been in over the last decade.
From a long-term perspective, IBM's share price broke below the lower quadrant of the Fibonacci Fan Tool. A break below the Lower Quadrant of the Fibonacci Fan Tool is usually the best opportunity to go long on a new position. If you are not familiar with the Fibonacci Fan Tool, be certain to check out my new webpage for it. It can be accessed under the Charting Tools menu item or you can just click this link for quick and easy access. A new window will open so you will not lose your place in the article.
But since IBM's share price has rebounded all the way back to the bottom of the Lower Quadrant of the Fibonacci Fan Tool, is now still a good time to purchase shares and go long? Here are the important items to monitor during IBM's current pullback to determine which support level to make your first scale-in purchase:
- Calendar year 2016 had the highest amount of buying momentum in the last decade according to the MACD Histogram, because of this I would expect support at the $166 or $158 price level during the current pullback
- If these support areas do not hold, it will most likely indicate a multi-year downtrend for IBM is looming
- IBM has earnings currently scheduled for April 18, 2017 after the market closes
- Because of the large amount of buying momentum leading up to this earnings report, downside risk should be limited to approximately 10% on an earnings or revenue miss as long as guidance for future quarters does not disappoint as well
- A $147.78 print for IBM's share price would be confirmation of a probable drop to the $130 support area
These are the items you want to watch for after earnings next week and in early May for a longer-term entry consideration.
IBM - Moving Averages
This is a 1 year daily candlestick chart to look at IBM from a moving average perspective. I've also placed a Fibonacci Retracement Tool on IBM's most recent uptrend in order to measure pullback areas.
IBM's share price should find support at either the 50% or 61.8% Retracement Line, which is basically supported by the 200 Day moving average line.
Any break below the 200 Day moving average should find support at the $158 support area where there is still an open gap-up. This gap-up or Rising Window candlestick pattern developed back in November 2016. A break below that $158 price gap-up area would not be good from a longer-term perspective of being long on IBM's share price. If the $158 price area fails, $147 is next and $130 is probable.
IBM - Earnings Watch
This final International Business Machines (IBM) stock chart is a 2 year weekly candlestick stock chart to look at its recent uptrend in a little more detail. A weekly candlestick chart provides 52 candlesticks over a year's time while a monthly chart only provides 12. So a weekly chart definitely helps with more detail.
If IBM can hold the $162 support area after it reports earnings next week, look at the MACD Histogram. Does the MACD Histogram reflect selling momentum that is decreasing? If so, then making a scale-in purchase around the $162 support area is warranted. Any purchases made would be held until a rebound towards its previous highs are in place. If not, hold off from making a scale-in purchase.
If IBM slashes through the $162 support area on heavy selling volume after it reports earnings, do not make any scale-in purchases until its share price gets closer to the $147 support area. A rebound trade can be played there. Rebound trades are usually good for a 5-10% quick minimum trade over a couple day period.
International Business Machines (IBM) Stock Chart Summary
The $158 support area is a key support area for the longer-term price action of International Business Machines (IBM). Maybe Watson can tell me if the $158 support area is going to hold or not. Because if it does, IBM's share price could make a run to the $195 or even the $225 price targets over the next 2 - 2.5 years.
But if the $158 support area does not hold, then the next major support level down is the $130 price level. That would mean that IBM's share price broke through its 200 Day moving average line, a bearish sign.
Monitoring the MACD Histogram on a weekly candlestick chart is the best option to see if the support level is going to hold or not. Waiting for 2 consecutive decreases in the weekly MACD Histogram before making a scale-in purchase can take away some of the risk of making too hasty a decision.
Any rebound should start to happen in buying volume that is above average trading volume. If it does not, then it is only a rebound trade and profits should be taken quicker than normal as the support level may not hold on another re-test after the fake rebound. The next support level below is in play at that point.
It all starts with next week's earnings report. Let me know if there are any questions with the above charts. Good luck trading!
On deck: US Bancorp (USB)
In the Hole: Microsoft (MSFT)