IBM Approaching Critical Support Level
Over the last five weeks, International Business Machines (NYSE: IBM) has dropped 23% thanks to a disappointing earnings report and the announcement that it is buying cloud-software firm Red Hat (NYSE: RHT).
The sharp drop has the stock within reach of a critical support level. IBM fell from early 2013 through the beginning of 2016. When that bearish phase ended, the stock seemed to find support in the $110 area as the stock bounced around the level for three weeks before reversing upward.
Prior to the lows in 2016, you would have to go back to 2010 in order to see IBM trading below the $110 level.
At this point, value investors and dividend investors alike have to be looking at IBM. The yield for IBM has jumped to over 5% thanks to the price decline and the recently announced dividend of $1.57 per quarter.
Earnings for the last four quarters have totaled $14.09 and given the current price, the P/E ratio is at approximately 8.25. It isn’t very often you see an established company like IBM trading at a P/E ratio under 10 and offering a 5% yield.
In addition to the news about IBM buying Red Hat earlier this week, the company announced on Tuesday that the board has approved an additional $4 billion in its stock buyback plan. This should also be a point of attraction to value investors as the float is being lowered.
The two biggest concerns I have about IBM right now are the stagnant sales and earnings, and the possibility that the company is overpaying for Red Hat. Over the last three years, IBM’s earnings have declined by an average of 2% per year and sales have declined at a rate of 1% per year.
Red Hat should be able to help with the earnings and sales growth as it has averaged earnings growth of 23% per year over the last three years, while sales have increased at a rate of 19%.
My concern is the fact that IBM is buying Red Hat for $34 billion and that amounts to $190 a share. The deal was announced on Sunday, October 28 and the Red Hat’s stock closed at $116.68 on Friday, October 26. That is a premium of almost 63%.
Like I stated before, value investors and dividend investors should potentially give consideration IBM if they don’t own the stock already. A P/E ratio below 10 and a 5% yield are hard to come by. For growth investors, having Red Hat in the mix has to be appealing for the possible growth it can add to IBM’s top and bottom lines.
For me, I would consider buying at the current level with a drop below $105 as a stop. The other possibility is to wait and see if the stock drops to the $110 level and then try to pick it up there. If I did that, I would use a move below $100 as a stop.
IBM sees MACD Histogram crosses below signal line
IBM saw its Moving Average Convergence Divergence Histogram (MACD) turn negative on June 10, 2026. This is a bearish signal that suggests the stock could decline going forward. Tickeron's A.I.dvisor looked at 39 instances where the indicator turned negative. In of the 39 cases the stock moved lower in the days that followed. This puts the odds of a downward move at .
Technical Analysis (Indicators)
Bearish Trend Analysis
The 10-day RSI Indicator for IBM moved out of overbought territory on June 04, 2026. This could be a bearish sign for the stock. Traders may want to consider selling the stock or buying put options. Tickeron's A.I.dvisor looked at 46 similar instances where the indicator moved out of overbought territory. In of the 46 cases, the stock moved lower in the following days. This puts the odds of a move lower at .
The Momentum Indicator moved below the 0 level on June 12, 2026. You may want to consider selling the stock, shorting the stock, or exploring put options on IBM as a result. In of 80 cases where the Momentum Indicator fell below 0, the stock fell further within the subsequent month. The odds of a continued downward trend are .
Following a 3-day decline, the stock is projected to fall further. Considering past instances where IBM declined for three days, the price rose further in of 62 cases within the following month. The odds of a continued downward trend are .
IBM broke above its upper Bollinger Band on May 29, 2026. This could be a sign that the stock is set to drop as the stock moves back below the upper band and toward the middle band. You may want to consider selling the stock or exploring put options.
Bullish Trend Analysis
The Stochastic Oscillator demonstrated that the ticker has stayed in the oversold zone for 1 day, which means it's wise to expect a price bounce in the near future.
IBM moved above its 50-day moving average on May 21, 2026 date and that indicates a change from a downward trend to an upward trend.
The 10-day moving average for IBM crossed bullishly above the 50-day moving average on May 28, 2026. This indicates that the trend has shifted higher and could be considered a buy signal. In of 14 past instances when the 10-day crossed above the 50-day, the stock continued to move higher over the following month. The odds of a continued upward trend are .
Following a +1 3-day Advance, the price is estimated to grow further. Considering data from situations where IBM advanced for three days, in of 371 cases, the price rose further within the following month. The odds of a continued upward trend are .
The Aroon Indicator entered an Uptrend today. In of 268 cases where IBM Aroon's Indicator entered an Uptrend, the price rose further within the following month. The odds of a continued Uptrend are .
Fundamental Analysis (Ratings)
The Tickeron Valuation Rating of (best 1 - 100 worst) indicates that the company is seriously undervalued in the industry. This rating compares market capitalization estimated by our proprietary formula with the current market capitalization. This rating is based on the following metrics, as compared to industry averages: P/B Ratio (7.758) is normal, around the industry mean (7.300). P/E Ratio (24.092) is within average values for comparable stocks, (68.492). IBM's Projected Growth (PEG Ratio) (2.542) is slightly higher than the industry average of (1.077). Dividend Yield (0.025) settles around the average of (0.027) among similar stocks. P/S Ratio (3.754) is also within normal values, averaging (15.665).
The Tickeron SMR rating for this company is (best 1 - 100 worst), indicating very strong sales and a profitable business model. SMR (Sales, Margin, Return on Equity) rating is based on comparative analysis of weighted Sales, Income Margin and Return on Equity values compared against S&P 500 index constituents. The weighted SMR value is a proprietary formula developed by Tickeron and represents an overall profitability measure for a stock.
The Tickeron Profit vs. Risk Rating rating for this company is (best 1 - 100 worst), indicating low risk on high returns. The average Profit vs. Risk Rating rating for the industry is 92, placing this stock better than average.
The Tickeron Price Growth Rating for this company is (best 1 - 100 worst), indicating steady price growth. IBM’s price grows at a higher rate over the last 12 months as compared to S&P 500 index constituents.
The Tickeron PE Growth Rating for this company is (best 1 - 100 worst), pointing to worse than average earnings growth. The PE Growth rating is based on a comparative analysis of stock PE ratio increase over the last 12 months compared against S&P 500 index constituents.
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a manufacturer of various computer products through the use of advanced information technology
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