IBM Stock Struggling on the Charts Before Earnings

IBM (NYSE:IBM) is set to report third-quarter earnings after the close tomorrow, Oct. 21. Wall Street anticipates earnings of $2.87 per share on revenue of $16.84 billion, according to Zacks Consensus Estimates. These figures represent year-over-year increases of 8.3% and 3.1%, respectively.

IBM was last seen up 1.4% at $239.79, running into familiar pressure at $240. The shares have gained roughly 9% so far in October, but have yet to recover from a record 25.2% single-day selloff on July 14, after Big Blue's preliminary second-quarter results fell short of earnings and revenue expectations. Year to date, the equity is down 19%. 

Looking back at the last 12 earnings reports, IBM finished the following trading session higher just five times, averaging a 6.3% move, regardless of direction. This time around, the options pits are pricing in a more modest 4.3% post-earnings swing.

Options traders have favored calls in recent weeks. At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), 40,260 calls changed hands over the past 10 days, compared to 14,886 puts. The corresponding call/put volume ratio of 2.70 ranks in the 65th percentile of its annual range.

Analyst sentiment is more divided. Of the 25 brokerages in coverage, 11 carry a "strong buy" rating, two say "buy," 11 recommend a "hold," and one sports a "strong sell" rating.