Following the impressive third-quarter results that beat the analysts estimates, last week, the stock of International Business Machines (NYSE: IBM) hit a 12-month high of $164.50 on Monday. Considering the impressive Q3 results, a trader should purchase the stock on dips. However, the recent issues faced by the company, as discussed underneath, indicates that the stock would undergo a short-term correction.
Last week, IBM agreed to pay $30 million penalty to the Australian Bureau of Statistics (ABS) for the failure to prevent the four DDoS (Distributed Denial of Service) attacks that resulted in a failure of the predominantly online household census. To prevent data theft, ABS shut down the website.
The attacks, which seem to have originated from Singapore, have not only tarnished the reputation of IBM but also decreased the possibility of receiving similar contracts in the future. This was evident from the statement of the Australian Prime Minister Malcolm Turnbull, who was vocal against the consideration shown by ABS to IBM during the tender process.
Fortune Magazine
In another setback, the senior content strategist of IBM, Elizabeth Wood, has resigned from IBM, citing the support offered by the company’s CEO Ginni Rometty (shown above) to the US President elect Donald Trump. Both Rometty and Wood had published an open letter, which is a cause of concern to the investors. It can be remembered that during the election campaign Trump had criticized IBM for outsourcing of jobs to foreign countries.
Following the Q3 results, the analysts had forecasted a price of $156.94 over a 12-month period. The price has now crossed the analysts’ target. Thus, it is imperative that a huge chunk of investors would certainly resort to book at least partial profits in the counter. Thus, it would certainly bring the share price down in the nearby future. At the end of third-quarter, a majority of analysts had given a buy recommendation. The latest survey indicates that 61% of the analysts have turned their rating from ‘buy’ to ‘hold’. So, based on the discussion, we can anticipate a price correction in the stock.
The price chart reveals the existence of resistance at 164.60. Minor support is seen at 163. The MACD indicator has started to descend towards the zero reading. More importantly, the main line of the MACD indicator has crossed below the signal line, thereby underlining the bearishness in the scrip.
IBM Stock Price: November 29th 2016
So, a trader should look at the possibility of investing in a one touch put option (referred to as low or below option by some binary brokers) contract which expires next week. The trader should enter the ‘low’ or ‘below’ trade when the price trades above 164. Looking for the best Australian binary option brokers? Why not check our expertly reviewed brokers to find which are offering the best bonuses and offers.
