It's that time of year again when financial writers give you a summary of what happened in the past 12 months and endeavor to predict what single stock could be a home run this coming year. It is an interesting exercise, although I think it is like putting all your money on one number in roulette.
Despite that quibble I will add my two cents to the mix this year. I think the stock performance of IBM (IBM) can surprise on the upside in 2020.
Let's pay a visit to the charts and indicators so I can give you my spin on the technical condition of IBM.
In the daily bar chart of IBM, below, we can see that prices have been trading sideways for much of the past year. Dips to around the $130-$125 area have been bought and slightly higher lows can be seen from May to August to December. Lower highs can also be seen from July to September to November. The pattern of trading is coming to an apex and ideally an upside breakout. Prices are below the flat 200-day moving average line and just above the 50-day moving average line. A rally to $140 will improve the technical picture.
The On-Balance-Volume (OBV) has been trending sideways from July, suggesting that traders and investors have continued to hold long positions in IBM in 2019. The Moving Average Convergence Divergence (MACD) oscillator has made higher lows from late August and is now close to crossing the zero line for an outright go long signal.
In the weekly bar chart of IBM, below, we can see the past three years of activity. Prices are below the flat 40-week moving average line.
The weekly OBV line has been steady the past year and the MACD oscillator is only slightly below the zero line so a price advance could move this indicator back to a buy.
In this weekly close only Point and Figure chart of IBM, below, we can see a potential upside price objective of $201 being projected.
Bottom-line strategy: I think the price gains in 2020 will be front loaded in the first two quarters of the year. If I had to call a top I would anticipate that the middle of April might be the best time to take profits. Looking at IBM I would recommend going long around $135 and risking a weekly close below $130. The $200 area is our price objective for the first half of 2020.
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