International Business Machines Corporation (IBM) has been a component of the Dow Jones Industrial Average since June 1979. The stock set its all-time intraday high of $215.90 in March 2013 and then bottomed with a low of $116.90 during the week of Feb. 12, 2016, a bear market decline of 46%. The stock has been a "Dog of the Dow" for several years given its share price weakness and solid dividend yield, now at 4.32%. IBM closed Tuesday, July 17, at $143.49, down 6.5% year to date and up 4.4% since trading as low as $137.45 on June 27. The stock is correction territory at 16.2% below its 2018 high of $171.13 set on Jan. 18.
Analysts expect IBM to post earnings per share between $3.03 and $3.06 when the company reports results after the closing bell on July 18. IBM had been posting revenue declines that reached a streak of 22 consecutive quarters, but that ended in the fourth quarter 2017. The company now has two consecutive quarters of revenue growth, but expectations have been disappointing. The key areas for performance come from cloud computing, data analysis, mobile technologies and security. (See also: IBM Seen Rebounding 7% Higher on Revenue Growth.)
The daily chart for IBM
The daily chart for IBM shows that the stock held its 50-day simple moving average of $143.38 on Tuesday and is well below its 200-day simple moving average of $151.48. My annual risky level is above the chart at $198.13, while my semiannual value level is below the chart at $122.09. The two horizontal lines are my monthly pivot of $145.06 and my quarterly risky level of $155.81.
The weekly chart for IBM
The weekly chart for IBM ended last week positive, with the stock above its five-week modified moving average of $144.10, but it was under this level at Tuesday's close. The stock is below its 200-week simple moving average, or its "reversion to the mean," at $154.97, last tested during the week of April 20, when the average was $157.96. The 12 x 3 x 3 weekly slow stochastic reading is projected to end this week rising to 33.57, up from 22.96 on July 13.
Given these charts and analysis, my trading strategy is to buy IBM shares on weakness to my semiannual value level of $122.09 and to reduce holdings on strength to my quarterly risky level of $155.81. (For more, see: IBM Working on 'Stablecoin' Tied to US Dollar.)