International Business Machines (IBM) reported better-than-expected earnings after the closing bell on Monday, July 19. IBM’s second-quarter earnings came in at $2.33 per share with revenue of $18.75 billion. Expectations called for $2.32 per share on revenue of $18.29 billion.
The stock traded as high as $143.70 as of 4:30 P.M. Monday versus its weekly pivot at $142.31. The day’s low was $136.21, staying above its 200-week simple moving average or reversion to the mean at $135.98.
The key positive was that cloud and cognitive software revenues rose to $6.1 billion. Revenue from Red Hat, purchased for $34 billion in 2019, rose by 20%. Demand for cloud software was the highest in three years.
IBM has a p/e ratio of 16.15% with a dividend yield of 4.72% according to Macrotrends.
The Daily Chart for IBM
The daily chart for IBM shows that it traded as low as $105.92 on October 28, 2020. A golden cross was confirmed on January 12, 2021, when the 50-day simple moving average rose above the 200-day simple moving average.
The 200-day SMA was a level at which to buy IBM. On January 27, this average was $122.55. On March 5, this average was $122.49. Buying at the 200-day SMA proved to be a profitable trade.
IBM opened above $142.31 today, which is a positive as the stock is stretching towards its 50-day simple moving average at $144.54, which has been tested this morning. This month’s risky level is above the chart at $154.90. Its 200-day SMA is $130.47 with its quarterly value level at $125.47.
The Weekly Chart for IBM
The weekly chart for IBM will be upgraded from negative to neutral given a close this week above its five-week modified moving average at $142.63. The stock is above its 200-week simple moving average or reversion to the mean at $136.00 versus Monday’s low of $136.21. The 12x3x3 weekly slow stochastic reading is declining at 48.50.
Trading Strategy: Buy weakness to the 200-week SMA at $136.00 and reduce holdings on strength to my monthly risky level at $154.90.