In his "Executive Decision" segment of Mad Money Monday evening, Jim Cramer spoke with Arvind Krishna, the new CEO of International Business Machines (IBM) which reported earnings of $1.84 a share after the close of trading Monday. The company also pulled its full-year outlook, citing the coronavirus pandemic.
Krishna said he was very proud of the quarter IBM just posted. He said IBM continues to power critical systems for their customers, such as credit card processing, banking and research.
Krishna said that cloud penetration is only at 20% and IBM plans to extend cloud services to the remaining 80%. IBM's recent acquisition of Red Hat has yielded $1 billion in revenue this quarter and Krishna noted that Red Hat's growth is accelerating.
We looked at the charts of IBM just last week and concluded that, "I have no expertise about IBM's upcoming earnings but the charts suggest prices can decline back to the $105 area." Let's check on the charts again today.
In this daily Japanese candlestick chart of IBM, below, we can see that prices have been rejecting the highs of the day with the upper shadows in the first half of the month. The rally has stopped short of the underside of the declining 50-day moving average line and the On-Balance-Volume (OBV) line shows only a tepid response from the March low.
Buyers of IBM have not been particularly aggressive. The 12-day price momentum study shows weakening momentum in April.
In this updated weekly we can see some upper shadows in recent weeks telling us that traders rejected the higher prices. The weekly OBV line is not supportive and the weekly slow stochastic indicator shows that prices were considered overbought going into this earnings report.
In this Point and Figure chart of IBM, below, we can see the previous price forecast of $105. We can also point out that a trade at $114.23 should weaken this chart and precipitate further declines.
Bottom line strategy: The charts of IBM looked vulnerable last week and this week we should see a decline. Stand aside and let's wait and see where support might develop.