International Business Machines: IBM Stock Is Setting Up to Run

IBM Stock
Photo: Sean Gallup / Staff / GettyImages

IBM Stock: Bullish Tailwind

I have been watching International Business Machines Corp. (NYSE:IBM) stock for some time, waiting for a new bull market to develop. The reason why I believe that a bull market is on the horizon for IBM stock is that the price has fulfilled a number of criteria that are indicating that a new bull market is ready to begin.

But there is still one obstacle that stands in the way. This obstacle comes in the form of a trend line, and it is the same trend line that I highlighted in my previous report on International Business Machines stock.

Since that last report, a brief sell-off hit IBM stock, but the price has once again returned to test the trend line. A break above this trend line would be tremendous news for the bullish camp, and it would suggest that the bear market that has plagued IBM stock since 2013 has finally ended, and that a new bull market is upon it.

International Business Machines stock has lagged the major market indices, as those indices have gone on to make new all-time highs. There is a lot of ground that IBM stock needs to make up, and surpassing this last hurdle would set the wheels in motion to achieving this.

The following International Business Machines stock chart illustrates a reason why I believe that a new bull market is on the horizon.

ibm2

Chart courtesy of StockCharts.com

Fibonacci retracement numbers (highlighted in green) are a very popular tool used by many technical traders. This tool is used to identify countertrend price objectives. In theory, when a stock pulls back from a primary trend, shares will retrace approximately 50%-62% of the primary move. Traders refer to this zone as “the box,” and they will be eyeing this area as one in which to enter long positions, and/or cover short positions.

International Business Machines stock was trending down for approximately three years until this retracement was finally complete. Now that the pullback in IBM stock is complete, the groundwork for a resumption of the bull market has now commenced.

The following International Business Machines stock chart illustrates the hurdle that needs to be crossed.

ibm

Chart courtesy of StockCharts.com

The downtrend (highlighted in blue) is the trend line that is acting as a hurdle that IBM stock must cross in order for the bulls to fully rejoice. This trend line is created by connecting the peaks on a price chart. This trend is identified by lower lows and lower highs.

There should be no mistaking a downtrend, as it can easily be identified as the price moves from the upper left to the lower right of the chart. These trends persist until the price gathers enough momentum to finally break above it.

A break above this level will be the signal that the bulls are waiting for. This act will finally indicate that the bear market is over. This breakout will be confirmed when IBM stock can close above it over two consecutive trading days. A confirmed breakout would open up the all-time high of $193.69 as the next level that could be tested in this new bull market.

The moving average convergence/divergence (MACD) indicator has just crossed in a bullish manner. MACD is a simple and effective trend-following momentum indicator. Signal-line crossings are used to distinguish between bullish and bearish signals.

In my previous report on IBM, I mentioned that a bearish MACD cross meant that current bearish headwinds would add pressure to a potential breakout and that IBM would have to return on a later date when the signal was aligned in a bullish manner. This is the scenario that is now in play, and as a result, the odds have increased that the trend line will break as bullish tailwinds are now supporting at a price advance.

Bottom Line on International Business Machines Stock

If International Business Machines stock can break above the downtrend line, it will signal that the bull market has fully resumed, and that higher prices in IBM stock are likely.


Editor’s Note: Hi, Patrick Brik here. If you enjoyed this article, you can get more of my opinions and commentaries in our popular daily tech letter, Profit Confidential. Published daily, it’s FREE! Join us when you click here now.