IBM has been struggling on the charts since its January peak
IBM Corp (NYSE:IBM) has been been struggling on the charts since its mid-January peak, with rebound attempts running out of steam near the $148 level, and more recently, at the 80-day moving average. This could signal a trading opportunity for short-term options bears, if history is any indicator.
According to Schaeffer's Senior Quantitative Analyst Rocky White, there have been seven prior instances of IBM trading within one standard deviation of its 80-day moving average after a lengthy stretch of time spent below it (defined as 60% of the time over the preceding two months, and at least eight of the previous 10 trading days), looking back three years. This has resulted in an average one-month loss of 1% for the tech shares, with 50% of those returns negative.
While IBM is in focus today on a patent dispute with Groupon, Big Blue is also slated to report second-quarter earnings tomorrow, after the market close. The options market is pricing in a 6.8% next-day swing for IBM stock, regardless of direction. This compares to the 4.3% single-session post-earnings move the shares have averaged over the past eight quarters -- where all but two reactions were negative.
Analyst attention has been mixed toward the Dow stock. Of the 15 brokerage firms covering the tech concern, nine currently offer tepid "hold" recommendations. Meanwhile, IBM's average 12-month price target of $165.47 is a 15% premium to the equity's current perch at $143.50 -- down 1.3% at $143.50.