Last week, technology bellwether IBM Corp. (NYSE: IBM, Stock Forum) reported third-quarter operating income of $2.8 billion, or $2.05 per share, compared to earnings of $2.4 billion, or $1.68 per share, in the same quarter last year. Revenue for the quarter rose 5% to $25.3 billion. Big Blue said revenue from its software segment grew by 12% to $5.2 billion during the period. Looking ahead, the company stood by its full-year earnings forecast, but did not issue guidance for the next fiscal year.
Technically speaking, IBM has struggled along with the rest of the market recently. The stock has shed about 44% from its July peak near $130 per share, pushing its year-to-date decline to more than 14%. However, IBM has fared extremely well when compared to its peers in the Select Sector Technology SPDR (AMEX: XLK, Stock Forum), which has plummeted more than 35% since January 2008.
Examining a monthly chart of IBM, the stock could be trading near a prime entry point for a long position on the shares. The shares are in the process of rebounding from long-term support at their rising 160-month moving average. Furthermore, IBM has found additional support at a trendline connecting its lows in October 2002 and July 2006. Currently, the equity is consolidating near former support/resistance at the round-number 90 level. Should this area prove supportive for the security, it could create a short-term floor for IBM, thus helping the shares to springboard higher.
Sentiment toward the technology concern is a mixed bag. Options traders have increased their preference for puts on IBM recently, despite the stock's recent technical strength. Specifically, the security's Schaeffer's put/call open interest ratio (SOIR) arrives at 1.06, as puts outnumber calls among near-term options.
Data from the International Securities Exchange (ISE) and the Chicago Board Options Exchange (CBOE) indicate a similar bearish skew toward IBM. The current ISE/CBOE 10-day put/call ratio arrives at 1.11, as puts have been bought to open at a faster rate than calls during the past several sessions. Growing pessimism on a rising stock has bullish implications from a contrarian viewpoint.
On the other hand, Wall Street analysts remain a point of concern for the shares. According to Zacks, 12 of the 15 analysts following IBM rate the shares a "buy" or better. However, considering the stock's attractive valuation and its strong third-quarter earnings report, these brokerage firms may be hesitant to downgrade IBM at this juncture.
Overall, the fact that IBM has held up remarkably well versus its tech-sector peers and the broader market bolsters the bullish case for Big Blue. If the security can avoid attracting the ire of Wall Street analysts while maintaining a trend of positive price action, we could see the remaining bears in the options pits abandon their positions. As a result, the unwinding negativity should create buying pressure that could send IBM steadily higher over the intermediate-term.