On April 19, IBM (IBM) took a massive hit following another disappointing earnings report. The stock fell nearly 5% that day as volume surged to extreme levels. Three weeks later, Big Blue was hit again on Warren Buffett news, sparking a six-day losing streak. After two days of recovery, as this week begins, IBM may have reached a selling climax. As a result, a low entry opportunity is developing for patient IBM investors.
Late last week, IBM stretched its drop from the 2017 highs to just over 20%. This steep selloff has taken out layers of support along the way. At last week's low, the stock had erased all of its post-election rally and had returned to a deeply oversold MACD, or moving average convergence/divergence reading. Big Blue has not been this overextended to the downside since late in 2014. With selling pressure easing off late as well, patient Big Blue bulls should take on a more positive view in the near term.
IBM should be considered a relatively low-risk buy between $152.00 and $150.00. This key support zone includes the November spike low as well as the October spike low. If IBM can continue the stabilization process above this zone, a healthy rebound could develop. Initial upside target would be the May 5 breakdown gap near $158.50. On the downside, a close below $148.00 would indicate that a much more prolonged basing process will be needed before the stock can mount a recovery.
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