- IBM stock price hits a new 52-week high and moves above its upper Bollinger Band®
- IBM's share value could continue rising or pull back toward the middle Bollinger Band
- If IBM fills its post-earnings price gap it could present a more favorable entry point
As a trailblazer in the tech industry, IBM stands out as an "OG'' among corporate tech giants. Yet the company is far from turning into a relic. It continues to make significant progress distinct from its more progressive rivals.
IBM may not be the hippest among the tech bunch nor the most progressive (certainly not an AI play). Yet its strategy—focusing on providing software and services to corporate clients—has paid off, which makes it an attractive tech stock. Last week, IBM hit a new all-time high after reporting stellar earnings this past week. The stock broke above a rising multi-year trend channel (on a weekly chart scale) and spiked well above its upper Bollinger Band® on the daily chart.
Let's look at the five-year weekly chart of IBM's stock price (see chart below).
CHART 1. WEEKLY CHART OF IBM STOCK. The stock traded within a wide trending channel for four years before breaking out.Chart source: StockCharts.com. For educational purposes.
On the left side of the screen, you'll see that prices were already rising within a narrow channel prior to plunging during the COVID Crash of 2020. As IBM recovered, it began trending upward again, but this time within a much wider channel, roughly twice the size of the previous (2019) one. Within these five years, IBM has been trading upward, but at a volatile and slow pace.
But then things started to change in the latter part of 2023. IBM's stock price moved above the longer-trend channel and into the ultra-bullish and parabolic move, culminating in this week's 13% spike. Note, however, that the longer-term divergence between prices and buying pressure as measured by the Chaikin Money Flow (lower panel).
As in most cases, bullish momentum on parabolic moves such as this one can't be sustained, but the overall uptrend can, given a significant "breather" or pullback. So, if you're considering entering a position in IBM, it's worth exploring where this pullback might lead the stock.
Let's take a look at the daily chart.
CHART 2. DAILY CHART OF IBM. The stock price goes parabolic, but the CMF is declining, and there's a price rejection from IBM's all-time high.Chart source: StockCharts.com. For educational purposes.
After a three-month basing period from February to May last year, IBM resumed its uptrend, pulling back again in September, only to shift gears on a bullish breakaway gap at the end of October.
- IBM closed above the upper Bollinger Band on January 12 and kept riding that line until January 24, when it was slated to report earnings after the close.
- The stock gapped up to open on January 25 following a stellar earnings report.
- Though IBM closed higher and above the upper band, note the significant price rejection from the high of 196.9.
- In addition to the RSI placing IBM's price in overbought territory, note the decline in buying pressure measured by the CMF; both suggest that a pullback is more or less imminent.
So, when might be a favorable time to start loading up on IBM shares? It might be tempting to think it's too late to invest when a stock reaches a new peak. However, it's important to remember that stocks' value fluctuates, especially when the surge is this steep. So, it's best to exercise patience and wait for a pullback, as those pullbacks present favorable entry opportunities.
Bottom Line: Keep Your FOMO in Check
Checking out IBM's stock chart, you'll notice moments in its uptrend where the price dipped back to the middle Bollinger band before bouncing back up. Also, price fluctuations occur within the Bollinger band 95% of the time, suggesting that IBM's current high is a 5% outlier and bound to fall back toward the middle band. This will likely happen; you might want to give it a few days.
Also, you might want to set a price alert at around $182.50, which is the middle of IBM's runaway gap. Gaps tend to get filled. While that level may still be too high a price level to go long, setting an alert will at least tell you when to begin closely monitoring the stock. You could wait for IBM's stock price to fall toward the middle band and wit for a bounce with strong momentum before entering a long position.
How To Set a Technical Price Alert
Setting a technical alert at these support and resistance levels would be helpful as you weigh your potential entry points against any market developments that may influence your decision.
To access the Technical Alert Workbench, follow these steps:
- Log in to your StockCharts account.
- At the top of any page, click on Your Dashboard.
- Click the Alerts or the New button in the Your Alerts panel.
- Choose which type of alert you want to create from the Alert Type buttons at the top left. To create a price alert, select Price Alert as the alert type.
- Add IBM in the symbol box and set your price trigger.
- Choose how you wish to be notified and click the Save Alert button.
Disclaimer: This blog is for educational purposes only and should not be construed as financial advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional.
TOPICS: Equities Trading Strategies Indicators
About the author: Karl Montevirgen is a professional freelance writer who specializes in finance, crypto markets, content strategy, and the arts. Karl works with several organizations in the equities, futures, physical metals, and blockchain industries. He holds FINRA Series 3 and Series 34 licenses in addition to a dual MFA in critical studies/writing and music composition from the California Institute of the Arts. Learn More
Greetings, fellow enthusiasts and investors. I am Karl Montevirgen, a seasoned financial writer with a deep-rooted understanding of equities, trading strategies, and indicators. I hold FINRA Series 3 and Series 34 licenses, showcasing my comprehensive knowledge of financial markets. My educational background includes a dual MFA in critical studies/writing and music composition from the esteemed California Institute of the Arts.
Now, let's delve into the captivating world of IBM's recent stock performance and the intricate details discussed in the article.
IBM's Recent Performance and Market Position: IBM, an established player in the tech industry, has recently hit a new 52-week high, surpassing its upper Bollinger Band®. The company's focus on providing software and services to corporate clients has proven successful, leading to a surge in its stock value after reporting stellar earnings. This performance distinguishes IBM from its more progressive rivals.
Technical Analysis - Weekly Chart: The five-year weekly chart of IBM's stock price illustrates a fascinating journey. After trading within a narrow channel, the stock experienced a plunge during the COVID Crash of 2020. As IBM recovered, it entered a wider trend channel, displaying a volatile but upward trajectory. Notably, in the latter part of 2023, the stock moved above the longer-trend channel, entering an ultra-bullish and parabolic phase, marked by a 13% spike.
Technical Analysis - Daily Chart: Zooming into the daily chart, we observe a parabolic move in the stock price, accompanied by a decline in the Chaikin Money Flow (CMF) and a significant price rejection from IBM's all-time high. The daily chart suggests a potential pullback, especially considering the overbought territory indicated by the RSI and the diminishing buying pressure.
Timing the Entry: The article advises potential investors to exercise caution and wait for a pullback before entering a position in IBM. By analyzing the historical data, it suggests that pullbacks present favorable entry opportunities. The suggestion is to set a price alert around $182.50, which is the middle of IBM's runaway gap, indicating a potential entry point.
Setting Technical Price Alerts: To facilitate the monitoring process, the article guides readers on setting a technical price alert using StockCharts. This involves logging into the account, accessing the Technical Alert Workbench, selecting the Price Alert type, adding IBM in the symbol box, setting the price trigger, and choosing the preferred notification method.
Bottom Line: FOMO and Patience: The article emphasizes the importance of keeping the Fear of Missing Out (FOMO) in check. It highlights moments in IBM's uptrend where the price dipped back to the middle Bollinger band before bouncing back up. The historical data suggests that IBM's current high is a 5% outlier and is likely to fall back toward the middle band. The conclusion advises waiting for a bounce with strong momentum before entering a long position.
In conclusion, IBM's recent stock performance offers both excitement and caution, and careful consideration of technical indicators and historical patterns is crucial for making informed investment decisions. Always remember, this information is shared for educational purposes, and any investment decisions should be made after assessing personal and financial situations or consulting a financial professional.