IBM Stock Downgraded as 200-Day Looms

Long IBM calls have continued to be popular

by Josh Selway

Published on Jan 13, 2020 at 10:10 AM

IBM Corp (NYSE:IBM) shares are trading lower today, down 0.8% at $135.52, following a downgrade out of Evercore ISI. The brokerage firm dropped its rating to "in line" from "outperform," while reducing its price target to $145 from $160. This stacks up with what most of the Street already thinks of IBM, since the majority of covering analysts already have the equivalent of a "hold" on the shares.

This bearish attention comes as IBM shares are trading right up against their 200-day moving average. This trendline capped the equity's upside on Friday, and also acted as resistance in early November. The $138 region in general could be problematic, as it previously served as a floor for the stock prior to an October bear gap.

Still, call buying has remained popular on the blue chip, based on data from the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). Long calls have roughly doubled long puts across these exchanges in the past 10 days, with the largest increases in open interest during this time frame occurring at the weekly 2/7 150-strike call, along with the February 150 call.

Short interest has continued to climb on IBM, as well. Short interest rose by 8.9% in the last reporting period alone, putting 4.2 days' worth of buying power into these bears' hands, based on average daily trading volumes. If this trend continues, it could represent another headwind for the security.

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