International Business Machines (IBM)

Question: Hi Steve - would you buy IBM here? It looks like it pulled back to the uptrend line from September. It's a play on AI and Quantum computing although not as sexy as the other names in the same group.

IBM: A breakout from 2012-2024 big base projects to 310 and 325

IBM's late 2024 breakout and retest from a 12-year big base suggests further upside to pattern counts at 310 and 325. Rising 26- and 40-week moving averages (WMAs) near 259-257 underpin this stock's bullish setup. IBM has shown market leadership since late 2021, confirmed by a bullish shift to a rising trend on the relative price 200-WMA.

Chart 1: IBM (top) and relative to the S&P 500 (bottom)

Tactically speaking: A developing bullish cup and handle for IBM

IBM has consolidated within its uptrend since peaking in late June and may be forming a bullish cup and handle formation. The late June-early August decline and the early August-early October rally formed the cup, while the pullback from the October 7 peak is shaping the handle. Holding within the zone between the 38.2% and 50% retracements of the cup rally from 275 to 267, with the 61.8% retracement additional support near 259, would increase confidence in the handle. A decisive breakout above 296-301 would confirm the cup and handle, signaling upside potential to 355-360.

Chart 2: IBM with developing cup and handle pattern