In our last review of International Business Machines (IBM) back on September 30 we wrote that "Traders should have picked up some long exposure to IBM. Add to longs on a close above $142 and look for gains to the $150 area for starters with the $192 area after that."
In this daily bar chart of IBM, below, we can see that our September recommendation was dismal to say the least. Prices did not rally to $142 so we did not add to longs but the bitter pill is the sharp gap to the downside in late October. Prices continued still lower into late November. Since the November nadir prices have climbed steadily higher to change the technical landscape.
We can see that prices are trading above the rising 200-day simple moving average line and above the bottoming 50-day average line. The gap from November has been filled. The On-Balance-Volume (OBV) line declined in October and November as sellers of big blue were more aggressive. This month the OBV has improved.
The Moving Average Convergence Divergence (MACD) oscillator gave a cover shorts buy signal in November and an outright buy this month when it crossed above the zero line.
In this weekly Japanese candlestick chart of IBM, below, we see a much improved picture. Prices are trading above the 40-week moving average line. The weekly OBV line has moved up from the middle of November and is surprisingly close to making a new high going back over the past three years. The MACD oscillator has crossed to a cover shorts buy signal.
In this daily Point and Figure chart of IBM, below, we can see an upside price target of $144.
In this weekly Point and Figure chart of IBM, below, we can see a tentative $171 price objective.
Bottom line strategy: Returning to the scene of the "crime" of our buy recommendation on IBM, traders could go long IBM again on a dip to the $132-$130 area. Risk to $127. $144 is our first price target with $171 the second price objective.
