Market Overview

IBM Falls Into Danger Zone

IBM Falls Into Danger Zone

International Business Machines Corp. (NYSE: IBM) investors were treated to a huge 8.8 percent gain last Wednesday following a major third-quarter earnings beat. IBM bulls were thrilled when the rally continued for another two days, with the stock gaining 0.8 percent on Thursday and 0.7 percent on Friday to reach its highest level since April.

Unfortunately, the stock stalled at $162.51 and quickly reversed course. After a 1.5 percent drop Monday, IBM is down another 2.3 percent on Tuesday and is now trading below its post-earnings opening price.

From a technical perspective, the sell-off puts IBM in a precarious position. All post-earnings buyers are now in the red on their positions, and unless the 200-day simple moving average can provide support at the $156 level, IBM is at risk of potentially filling its earnings gap in coming days.

Below $156, the only other potential near-term support level is the $152 to $153 level that served as resistance back in June. Below that level, a gap fill to $147 is likely.

Long-term IBM investors struggling to understand why anyone would be selling a stock after such an impressive earnings beat shouldn’t sweat IBM’s short-term trading action. If the stock returns to the $147 level, it likely won’t last for long. Technical traders often use gap fills as buying opportunities, and stocks tend to bounce once they have filled their gaps.

If IBM doesn’t make it back to $147 it would be an even more bullish sign that buyers want into the stock so badly that they are unwilling to wait for a complete gap fill.

Joel Elconin contributed to this report.

Related Link: What Wall Street Thinks Of IBM's Big Q3 Earnings Beat

Posted-In: Earnings News Guidance Technicals Movers Tech Trading Ideas Best of Benzinga


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