International Business Machines (IBM) is due to report its Q4 earnings after the close of trading on Tuesday. The consensus among sell side analysts seems to be for an EPS of $4.68 and revenue of $21.62 billion. Fundamentals are above my pay grade so let's check out the charts and indicators. IBM was and is my 2020 pick for the year. Let's see if anything has changed in the past three weeks.
In this daily bar chart of IBM, below, we can see that prices have been trading sideways for several months. I can also see that prices have been trading into a tighter and tighter trading range since early June - higher lows and lower highs for over seven months. This could be considered by chart watchers a large triangle formation.
Prices are above the slightly rising 50-day moving average line and testing the slightly declining 200-day moving average line. We could see prices close above the 200-day line today. The trading volume looks like it has been heavier since July than before July and that is not typical of a triangle pattern. Volume tends to diminish through a triangle as the trading range narrows. Maybe this is not a triangle but some other pattern or no pattern at all. We'll see.
The On-Balance-Volume (OBV) line has been improving the past several weeks and suggests that traders are more aggressive buyers ahead of today's earnings report. The Moving Average Convergence Divergence (MACD) oscillator crossed above the zero line earlier this month for an outright go long signal.
In this weekly bar chart of IBM, we can see that prices are testing the mostly flat 40-week moving average line.
The weekly OBV line looks like it has been slowly firming the past three months suggesting some quiet but more aggressive buying ahead of earnings.
The MACD oscillator is crossing to the upside from below the zero line for a cover shorts buy signal.
In this Point and Figure chart of IBM, below, we used weekly close only data and here the software projected a potential upside price target of $201.
Bottom line strategy: I have no special knowledge of what IBM is going to report tonight but the charts and indicators have a bullish cast to them. I favor an upside move.
