International Business Machines Corp. (NYSE:IBM) — I last featured IBM stock as the Trade of the Day on Feb. 17, following a buy signal from my proprietary indicator, the Collins-Bollinger Reversal (CBR), at the late-January low at $149.52.
Since then, shares ran to a high at $164.99 in late February, retreated back to support under $155, and then formed a support line at the 50-day moving average at $160. On Monday, IBM stock broke through its February high on solid volume and appears to be headed much higher.
The reason for the high-volume breakout was anticipation of the company’s Q1 earnings report. After the close, adjusted earnings of $2.91 per share beat expectations of $2.80, and gross profit margins surged 80 basis points to 49.3%. However, revenue fell short of estimates and was down 12% year over year to $19.59 billion.
IBM is one of the most well-known global information technology names, even among developing nations. S&P Capital IQ has a “buy” rating on IBM stock and notes the company has been doing a good job of focusing on emerging growth areas. Therefore, if we get a post-earnings pullback, I would be a buyer.
IBM stock has formed a bullish saucer formation with support at slightly below its 50-day moving average. Buy shares under $160 for a trading target of $175, which would result in a return of 9%. Investors can buy IBM stock as a long-term holding with an objective of $190-plus, in addition to its $4.40 dividend for a forward annual yield of 2.6%.
