IBM Is Beginning to Work Through Heavy Resistance
IBM (IBM) - Get Report has rebounded nicely off last week's low. The stock's steep slide off the early November high, which dropped shares to fresh 2015 lows, bottomed just above $132 on Friday, Nov. 13. The following Monday, IBM began a steady rebound that by the end of the week had carried shares past the October lows. For frustrated bulls, last week's rally should come as quite a relief. The basing action continues to improve this week.
During the initial stage of the early November selloff, IBM was hit with a fairly heavy selling wave. The volume surge on Nov. 9 drove the stock below the October low and into fresh 52-week-low territory. After a one-day pause, IBM began to fall again but with far less momentum. The stock was beginning to show signs of downside exhaustion just as a divergent moving average convergence/divergence was taking shape. The rebound that followed now appears to have left behind a significant bottom neat last week's low. IBM has more work to do, but the picture is turning much more positive in the near term.
IBM investors should consider the $135-to-$137.50 area as a low-risk buy zone. If the rally that began last week is to remain intact, the stock should hold in this area. The key over the next few sessions will be a move past the $141 level. Once past this heavy resistance, which includes the August low, the stock will have cleared a big hurdle.
On the downside, a close back below $134 will send a clear warning sign that more basing will be needed before a significant recovery can take hold.
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Disclosure: This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.