IBM (IBM) is the Stock of the Day on Real Money this Wednesday.
(IBM is my technical pick for the year, see "I'm Putting a Marker Down on 'Blue' for 2020".)
After the close Tuesday the company reported its Q4 numbers. Big Blue reported a 0.1% Y/Y revenue growth which broke a string of five consecutive Y/Y declines. I won't bore you with all the numbers but total cloud revenue was up 21% to $6.8 billion.
Also, Red Hat revenue was up 24% to $1.07 billion, reportedly normalized for historical comparability. For the Fiscal Year 2020 the company sees operating EPS of at least $13.35 which is higher than the consensus of $13.29. The stock is trading up about 4% in early activity Wednesday but was higher last night.
Let's see how this strength will tip the indicators.
In this daily Japanese candlestick chart of IBM, below, we can see the price action of the last year. Notice the falling window (gap lower in Western technicals) in October and the many (bearish) red candles in November and December. In January the pattern changes to more white or bullish candles with prices crossing above the 50-day and 200-day moving averages.
Prices have rallied today (not shown) to the $145 area and are testing the highs of September. A breakout over these highs should open the way for further gains.
The On-Balance-Volume (OBV) line is bullish and pointed upwards and so is the Moving Average Convergence Divergence (MACD) oscillator.
In this weekly bar chart of IBM, below, we can imagine what today's price strength will do for the chart at Friday's close. Prices should be firmly above the 40-week moving average line. The weekly OBV line should rise further and the MACD oscillator could be testing the zero line for a buy signal.
In this updated daily Point and Figure chart of IBM, below, we can see today's rally and a potential upside price target of $173. $200 is still our longer-term target.
Bottom line strategy: IBM has made a turn to the upside and soon we should see some sell side analysts changing their tune on the company. Continue to hold longs that have been recommended. Risk a close below $135 now. $173 is our first upside price objective.
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