IBM to Report Earnings - Here's What the Charts Say Now

International Business Machines is set to report earnings on Monday. After a healthy bounce, here's what the charts look like for the stock.
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International Business Machines  (IBM) - Get Report will report its quarterly results after the close of trading Monday. Shares opened lower by about 1%, but like the Nasdaq have rallied back to flat on the day. 

It’s an interesting situation with IBM. It’s expected that cloud demand is climbing significantly in the new coronavirus-impacted world. That’s fueled an exponential increase in remote work and video conferencing, as well as driven up social media use, video streaming and cloud computing needs.

That last part is a big one for IBM as it continues to look for growth from the cloud. However, it hasn’t seen the same impact that others have in the space, mainly Amazon.com  (AMZN) - Get Report and Microsoft  (MSFT) - Get Report. These two have seen tremendous growth, with both companies sporting a market cap in excess of $1 trillion.

So the question becomes: Can increased cloud usage fuel IBM stock higher or will it have a muted impact that pushes shares lower?

When it comes to the charts, we are in the reaction business, not the prediction business. I don’t know how the stock will react to its quarterly numbers and ensuing conference call but I do know that we can map out key levels ahead of time.

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Trading IBM Stock

Weekly chart of IBM stock. 

Weekly chart of IBM stock. 

Above is a five-year weekly chart of IBM stock. As you can see, it certainly doesn’t emulate Amazon, Microsoft or any number of large-cap tech winners over the past few years.

Over the past few weeks, IBM stock has been on a tear, rebounding hard off its lows near $90. It reclaimed the vital $100 mark and continued to rally before being rejected by the $125 level last week.

Some investors may be frustrated by this type of volatility, but I view it more positively. It gives investors a roadmap to help them navigate the post-earnings journey we’re about to embark on by knowing key support and resistance levels.

If the reaction is bullish, we need to see IBM stock reclaim the $125 level it was rejected from last week. On top of reclaiming this mark, we need to see the stock hold this mark as support should shares begin to fade from the move. Above that level puts the $130.30 to $134.65 area in play, which is a cluster of major moving averages.

I expect this level to act as resistance, but if IBM can clear both of these levels, it puts a move up to $145 in play.

On the downside, I don’t expect a ~16% correction down to $100. However, should IBM decline after its report and move below $110, $100 will become the next focus spot. This level needs to hold as support or a retest of the lows is in play.