International Business Machines (IBM) is a stock that belongs in everyone’s investment portfolio. Shares of IBM popped higher on July 20 on a better-then-expected earnings report but failed to hold its 50-day simple moving average. It’s been trading sideways to down since then and should be bought on near-term weakness.
Investors may be ignoring the cloud and software revenue being generated by IBM’s acquisition of Red Hat
IBM has a reasonable p/e ratio of 15.93% and offers a dividend of 4.71%. The company has beat earnings-per-share estimates in 27 consecutive quarters.
The daily chart for IBM shows the stock above its 200-day simple moving average, which is a buy level at $133.76. The weekly chart shows technology giant above its 200-week SMA, which is a buy level at $135.69.
When I graduated from Georgia Tech as an industrial engineer in 1966 my first job was at Grumman Aerospace in Bethpage, Long Island. I taught myself how to program in Fortran. I wrote software to monitor the time and scheduling in tool design projects that would be used on the production of aircraft for the Navy.
I was introduced to the IBM System/360, which was their newest mainframe computer. At the same time, I took classes at the Brooklyn Poly facility in Farmingdale near Grumman. Brooklyn Poly also had an IBM 360 computer. I thus had computer time from both locations, which helped me at work and getting my Master of Science degree.
The Daily Chart for IBM
The daily chart for IBM shows the formation of a golden cross on January 12. This is when the 50-day simple moving average rose above the 200-day simple moving average. The 200-day SMA was a buying opportunity at $122.55 on January 26.
Once IBM popped above its 50-day SMA at $123.34 on March 8 there was a momentum run-up to the June 10 high of $152.84. The 50-day SMA failed to hold at $145.36 on July 2 and this began the sideways to down price action. The low of $136.21 on July 19 was just before the positive earnings report. Since July 20, the 50-day SMA has been the ceiling.
The weekly and monthly risky levels are $141.74 and $145.66. The 200-day SMA is at $133.76 with the quarterly value level at $125.47.
The Weekly Chart for IBM
The weekly chart for IBM is negative with the stock below its five-week modified moving average at $140.84. The stock is above its 200-week simple moving average or reversion to the mean at $135.69, which is a buy level. The 12x3x3 weekly slow stochastic reading is declining at 28.60.
Trading Strategy: Buy weakness to the 200-week SMA at $135.69 and add to the position at the 200-day SMA at $133.76. Reduce holdings on strength to the monthly risky level at $154.66.
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