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IBM Chart Says Avoid as Stock Breaks Key Level After Q3 Report

IBM stock is dropping after the tech icon posted disappointing earnings. The chart says avoid until the stock reclaims a key level.

Shares of International Business Machines  (IBM) - Get International Business Machines (IBM) Report aren’t trading well on Thursday, down about 7.5% after the tech icon reported Q3 earnings.

The slump comes after the company reported revenue of $17.6 billion, up just 0.3% year over year and below analysts’ expectation of $17.8 billion.

On the bottom line, IBM reported earnings of $2.52 a share, a year-over-year decline from the year-earlier quarter.

For a stock that recently found some momentum and was looking for a breakout, this was a disappointing quarter.

IBM remains plagued by the same problem it’s had for years: There’s simply no momentum in its business.

Contrast that with something like Tesla  (TSLA) - Get Tesla Inc Report, which is pushing all-time highs after earnings, or even a stock like Alphabet  (GOOGL) - Get Alphabet Inc. Class A Report  (GOOG) - Get Alphabet Inc. Class C Report and one wonders why investors should own IBM.

Worse, while IBM stock was down in premarket trading, it was at least holding up above a key level. Following the open, though, that is no longer true. Let’s look at the chart.

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Trading IBM Stock

Daily chart of IBM stock.

Daily chart of IBM stock.

After the stock dipped in August, a meager rally was met by resistance at $140 as IBM stock rolled over to multi-month lows in September.

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After finding its footing just above the 50-week moving average, the shares roared higher -- and then double-topped near $145.

While IBM was holding the 10-day and 21-day moving averages ahead of the earnings report, Thursday’s gap down is causing issues.

Not only did the stock fail to hold the August low near $132.75, but when we overlay the weekly measures, you’ll see that IBM gapped below the 50-week and 200-week moving averages, as well as the weekly VWAP measure.

It’s also below the 61.8% retracement of the very wide 2020 range.

This is not a good look and it has me putting IBM stock in the “no-touch” pile.

If it can reclaim the $132.78 level, then I would consider a long against the post-earnings low, depending on far the stock sinks. 

A move back above this mark could put a gap-fill at $140.70 back on the table.

But keep in mind how many significant weekly measures sit between $133 and $135, followed by the 200-day moving average near $137.

Not long ago IBM was being championed, but with its current technical setup, I’m not so sure about that.

Instead, it looks as if short-seller Jim Chanos was right