IBM (IBM) stock surged 3.5% on its heaviest upside trade in months on Thursday. This upgrade-inspired breakout drove the stock past a very heavy resistance area. In mid October the stock suffered a staggering hit following its third-quarter earnings report.
IBM fell over 3% in the early going on Oct. 18 before reaching its 200-day moving average. The stock has been stuck in a narrow range just below the earnings-inspired breakdown gap ever since.
With yesterday's powerful surge, IBM has left behind a very solid layer of support. The stock now has plenty of room to extend a new rally leg and is far from overbought. Patient investors should take a much more positive view of the stock now.
A run past the $165 area, which marks the 2016 highs, seems very likely. Once past this big hurdle IBM will be on course for a run all the way up to its 40-week moving average near $170. Big Blue has been trading below this declining long term indicator since the third quarter of 2014.
As the current breakout develops investor should key on the $158.50 to $156 area. This is a very solid support zone that includes the October high near the upper band and Thursday's breakout gap near the lower band. A dip back do this zone will offer a low-risk entry opportunity.
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