IBM Stock Shatters Expectations, Hitting a New All-Time High: A Buying Opportunity?

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.