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IBM Earnings Preview: Here Is the Stock's Must-Hold Support

International Business Machines continues to slowly chug its way higher. Here's how to trade IBM once it reports fourth-quarter earnings.

Large-cap tech stocks have been on fire, and while International Business Machines  (IBM) - Get Report continues to hold up, it still has a long way to go before posting the massive returns that others have.

While IBM shares have severely lagged Apple  (AAPL) - Get Report, Microsoft  (MSFT) - Get Report, Salesforce  (CRM) - Get Report and others, it’s about in-line with VMWare  (VMW) - Get Report, Oracle  (ORCL) - Get Report and some of tech’s older companies. 

Will it leave behind the latter and start to perform like the former - ditching old-tech performance and catching up to its larger-cap peers - or will IBM continue to bumble along?

In either scenario, the stock will need a catalyst, which may come after IBM reports earnings on Tuesday after the closing bell. Let’s look at the charts to see how the technicals are lining up.

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Trading IBM Stock

Weekly chart of IBM stock

Weekly chart of IBM stock

IBM hasn’t been stellar, rising just 3% over the past three months and 11.5% over the past year. That performance badly lags many other stocks and even the overall indices. In fact, over the past six months, the stock is actually down 8%.

In short, IBM’s run has been very lackluster. However, the charts are looking better over the past few weeks. For instance, last week IBM continued higher on the prior week’s momentum.

In the second full week of 2020, IBM rallied off wedge support (blue line), broke out over wedge resistance (purple line) and reclaimed the 10-week, 50-week and 200-week moving averages.

So what now? If the stock continues to rally this week on better-than-expected earnings, I want to see if shares can get to $142.50. IBM has struggled to hold up over this level over the past two years. Reclaiming it would go a long way in showing that bulls are back in control.

If IBM stock can eventually reclaim $142.50, it puts the $147.50 to $150 zone on the table.

On a pullback, support remaining intact is key to the bull case. All of the major weekly moving averages outlined are between $135 and $136. Ideally, the stock will not break below this area on a pullback, but even more important is wedge support. Below this mark puts $130 or lower on the table.

IBM isn’t an exciting stock to trade, particularly compared with its peers. But profits are never boring. Let’s see how the stock reacts to the company’s fourth-quarter earnings report. Below support and shares may flail in no man’s land. On a bullish reaction, watch $142.50.