Stock of the Day: Did IBM Just Break Out?

Shares of International Business Machines Corporation (NYSE:IBM) are trading lower during the premarket session on Tuesday. But they may have broken out. This could be a bullish dynamic and may set the stage for a move higher. This is why IBM is the Stock of the Day. In the stock market, resistance is a price level where there is a large number of shares for sale. At these levels, investors and traders who wish to buy can do so without pushing the price higher. As you can see on the chart, there was resistance at $239 for IBM. Shares tend to selloff after they reach these levels. This happens when some of the sellers who created the resistance become anxious and impatient. They worry others will be willing to sell at lower prices, and they know this is who the buyers will go to. As a result, they reduce their offer prices. Other concerned sellers see this and do the same. This creates a downtrend. But sometimes at resistance levels, the buyers eventually overpower the sellers. They buy all their shares, and the price ends up going higher. When this happens, traders say it is a breakout. This can be a bullish dynamic. With these sellers out of the market, buyers will be forced to be aggressive and outbid each other to get the sellers back. This creates an uptrend. IBM is also coming out of a classic ‘ascending triangle’ pattern. This pattern illustrates patient sellers and aggressive buyers. The sellers were willing to be patient and stay at the resistance level. But as time passed, the buyers were willing to pay higher prices. This is why the line on the lower part of the pattern ascends. When a stock reaches a resistance level after being in an ascending triangle pattern, there is a good chance that a breakout follows. Shares of IBM may be forming a new uptrend. IBM Stock Price Activity: IBM shares were down 1.46% at $245.46 during premarket trading on Tuesday, according to Benzinga Pro data. Photo: Shutterstock