Trading Idea: Momentum Building in IBM

Published on Thursday, 14 June 2012 07:16 Written by TradersHuddle Wire

New York, June 14th (TradersHuddle.com) - Shares of International Business Machines Corp. (NYSE:IBM) closed the trading session at $193.10 with its price action in a very tight range, given that calculated support is set at $187.00 and the calculated resistance is set at $196.70.

International Business Machines Corporation (NYSE:IBM) provides computer solutions through the use of advanced information technology. The Company's solutions include technologies, systems, products, services, software, and financing. IBM offers its products globally through different distribution channels. Its Global Technology Services segment offers IT infrastructure and business process services. The company's Global Business Services segment provides professional services and application outsourcing services, including consulting and systems integration, and application management. IBM was founded in 1910 and is based in Armonk, NY.

IBM's stock price action indicates that both sellers and buyers are materializing very close to each other. This signals an area where momentum is building, since the stock can resolve by breaking out of the developing tight range.

Traders wanting to establish a position should pay close attention to IBM's price action, as any movement outside its predefined range of $187.00 and $196.70 could grasp the attention of momentum buyers that look for a big movement in the price of the stock. Traders need to be aware that tight range resolution works both ways, hence, a move below support could spark above the average selling. A tiered approach could be the best way to start a position; enter into it while the stock is in the tight range, and then add to this position as it breaks and closes above resistance.