International Business Machines Corporation (NYSE: IBM) seems to be gearing up for a surge as per its latest charts. International Business Machines Corporation provides integrated solutions and services worldwide.
Its Cloud & Cognitive Software segment offers software for vertical and domain-specific solutions in various application areas; customer information control system and storage, and analytics and integration software solutions to support client mission on-premise workloads in banking, airline, and retail industries.
Bullish Indications
#1 IH&S Pattern: As you can see from the daily chart, the stock has been forming an Inverted Head and Shoulders (IH&S) pattern. This IH&S pattern is marked in the chart in pink color. An IH&S pattern is a strong bullish pattern. Once a breakout from this pattern occurs, the stock may move higher in the short term.
IBM – Daily Chart
#2 Price above MAs: The price is currently above both the short-term moving average of 50-day SMA and the longer-term moving average of 200-day SMA. This usually implies a possible bullish bias for the stock.
#3 MACD above Signal Line: As you can see from the daily chart, the MACD line (blue color) is currently above the signal line (orange color), indicating a possible bullish bias.
#4 Bullish ADX and DI: The ADX indicator shows bullishness because (+DI) is greater than (-DI), and ADX is rising from below both (+DI) and (-DI).
#5 Bullish Aroon: The value of Aroon Up (orange line) is above 70 while Aroon Down (blue line) is below 30 in the daily chart. This is a possible bullish indication.
#6 Symmetrical Triangle Pattern: The daily chart shows that the stock has been forming a Symmetrical Triangle pattern. This is a continuation pattern and is characterized by two converging trend lines connecting a series of sequential peaks and troughs. This pattern is marked on the daily chart as purple color lines. The breakout from a symmetrical triangle pattern usually signifies the start of a bullish move.
IBM – Weekly Chart
#7 Bullish MACD: In the weekly chart as well, the MACD line is above the MACD signal line, indicating possible bullishness.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level for IBM is above yesterday’s high, at around $139.
TP: Our target prices are $144 and $149 in the next 3-6 months.
SL: To limit risk, place a stop loss at $136.00. Note that this stop loss is on a closing basis.
Our target potential upside is nearly 4% to 7% in the next 3-6 months.
For a risk of $3.00, the target rewards are $5.00 and $10.00. This is a nearly 1:2 and 1:3 risk-reward trade.
In other words, this trade offers nearly 2x to 3x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down with high volume from the symmetrical triangle pattern. The sell-off of the stock could also be triggered in case of any negative news, overall weakness in the market, or any regulatory changes in its sector.
Happy Trading!
— Tara
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