International Business Machines Corp. (IBM) was covered back on July 19, when it was being pummeled. We summed up our opinion this way: "IBM broke down this morning to a new low. A strong rally above $158 would be needed to turn the short-term chart around. Until the charts of IBM look better, I think the current yield is not enough of an incentive to buy IBM now." The bears remained in control and IBM did not reach a low until the middle of August around the $140 level.
Prices have firmed slowly over the past six or seven weeks, but is this enough improvement in the charts and indicators to entice one to go long? Let's check out the latest charts and indicators below.
In this daily bar chart of IBM, above, we can see that in September the stock rallied above the declining 50-day moving average line. IBM is still above the 50-day and its slope has turned positive. The 200-day moving average line is still pointed lower and intersects around $159.
Volume increased temporarily in September, but does not suggest strong buying. The On-Balance-Volume (OBV) line can be easier to decipher than the volume histogram, but the OBV line has been neutral since May. In the lower panel is the 12-day momentum study, which shows a bullish divergence in August and a bearish divergence in September and October.
In this weekly chart of IBM, above, we went back five years to get a better perspective of the "big picture" of the Big Blue. IBM is trading below the 40-week moving average line, which is pointed down. The weekly OBV line has been in a downtrend from early 2014, signaling some long-term liquidation and selling.
The weekly Moving Average Convergence Divergence (MACD) oscillator has recently crossed to the upside from below the zero line. This signal is a cover shorts buy signal, as it is a buy in a downtrend.
In this Point and Figure chart of IBM, above, the price action does not show much accumulation and the chart indicates a downside price target in the $119 area. A decline to $138 will be a new low for the move down.
Bottom line: IBM has come off the mat, but it is not showing us much in the way of accumulation (buying). IBM could creep higher, but a retest of the August low is probably needed to give potential buyers confidence that the downtrend is over.