Here’s Why IBM Stock Price Gapped Higher

Shares of International Business Machines Corp (IBM) opened 3% higher yesterday after the tech giant reported higher-than-expected Q4 earnings. The stock ended the day 3.39% higher to trade at the highest levels since October last year. 

Fundamental analysis: A successful year behind

IBM reported earnings of $4.71 per share, compared to analysts’ estimates of $4.69 per share. Furthermore, the reported revenue of $21.77 billion was also better than $21.64 billion expected by analysts. 

Analysts were especially focused on the revenue number given that it had previously fallen five quarters in a row. For the current year, IBM said it expects $13.35 in earnings per share, excluding certain items, which is 4.2% higher than what the company earned in 2019. 

IBM’s Cloud and Cognitive Software category recorded a 9% increase compared to the prior year by generating $7.24 billion in revenue.

Technical analysis: Major resistance lies ahead

Since the beginning of this year, IBM has gained 8.7%. The price action stopped its march forward by hitting the 3-year down-slipping trend line that connects higher lows (the thin red line). 

Moreover, the zone around the $145 mark also hosts a 50% retracement level, while the 200-WMA trades above $147. Thus, this area is highlighted with multiple layers of resistance. If broken, the next resistance area is $153 - $157. 

On the downside, the 100-WMA is at $138, and it is likely to provide significant support to the bulls. Any rotation lower should, at least, stop at this level. The mini ascending trend line that connects lower highs, is providing further support at $133. In general, the chart suggests that the $130 - $140 area provides a nice opportunity for those who are looking to buy the IBM stock. 

Summary

IBM reported better-than-expected Q4 earnings as the tech giant beat analysts’ estimates on earnings and revenue. The stock price has reacted positively, as expected, as it gained 3.39% yesterday and may continue to rally in the coming days.