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Does IBM’s Recent Rally Suggest Upside Ahead of Earnings?

International Business Machines has been doing well lately, working on its sixth straight day of gains on Friday and hitting its highest levels in a month.

With the recent rally, shares are up 8% from the recent low, as investors prep for earnings on Monday after the close.

On the surface, IBM stock has done well from the March lows, rallying about 40%. It even raided its dividend during the pandemic. However, it lags many big-tech stocks on the rebound.

For instance, Apple and Amazon are each up more than 80% from the lows, while Microsoft is up almost 60%. Even the Invesco QQQ ETF is up far more than IBM, up 57% from the lows.

Trading IBM Stock

Daily chart of IBM stock.

Daily chart of IBM stock.

Chart courtesy of Stockcharts.com

To put it simply, the charts here are a total mess. In February, IBM stock underwent a powerful pop into the $150s, before getting caught up in the selloff. Shares broke below $100 in March before rebounding into the $115 to $125 range.

Stuck there now, we just don’t have enough clarity to make a conviction call in IBM. After earnings though, we may have a more clear roadmap.

On the upside, bulls will gain clarity if the stock can clear and close above $130. Above $130 satisfies a few technical developments. It fills the gap-down from June, clears the 61.8% retracement and puts IBM over the 200-day moving average and range resistance.

If that development occurs, it puts the June high in play near $136. Above that is the 78.6% retracement, near $141.

On the downside, see how IBM stock does with the 20-day and 50-day moving averages. Below puts recent support near $115 and the 38.2% retracement on the table.

Should shares close below all of these marks, bulls may be in trouble. It could put the 23.6% retracement on the table at $104.86.

So what’s the bottom line here? There’s a lot of directionless chop without either bulls or bears gaining meaningful traction. At least we know our ranges, though. Above $130 opens up more upside and below $115 opens up more downside. In between and the chop can continue.