By Brian McCormick
As the heaviest-weighted name in the Dow Jones Industrial Average and a key tech component in the S&P 500, what happens to Big Blue (NYSE:IBM) will have broad impact on the markets.] There are some important technical factors at play in IBM, which will report earnings results on Tuesday. As the heaviest-weighted name in the Dow Jones Industrial Average and a key tech component in the S&P 500, what happens to Big Blue will have broad impact on the markets.
Ahead of the company's last earnings release on Jan. 18, IBM's chart showed a clear bullish "pennant" with an upside potential to the $170 area. It came very close to hitting that level in recent months, stopping about $2 short.
That is an important technical condition: When patterns complete, there is often retracement risk and profit taking on news.
Today we are looking at a weekly chart below because it makes the price action easier to see. The first key level to note is support that I have indicated with the horizontal line at the $165 area, which price is trading above this afternoon.
The $165 level has been tough for the stock to overcome; shares have breached it on just a handful of days in the last two months. A move below $162 -- indicated by the sloping orange line under the most recent price action -- would break IBM's current short-term uptrend.
Far more important is the mid-March low of $152, which is the big downside level to watch on weak earnings or outlook. This was also the breakout level in January when the stock hit its highest levels. A break below that area could clear the way for a fall to the 200-day moving average, last at $144.66.
If the news is strongly bullish, the all-time high at $167.72 is the level to beat. Where the stock might go after that is anyone's guess in the near term. Round numbers such as $170, $175, or even $180 on a big beat and strong outlook would make likely targets.