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PreMarket Prep Stock Of The Day: IBM

Joel Elconin

Benzinga's PreMarket Prep airs every morning from 8-9 a.m. ET. During that fast-paced, highly informative hour, traders and investors tune in to get the major news of the day, the catalysts behind those moves and the corresponding price action for the upcoming session.

On any given day, the show will cover at least 20 stocks determined by co-hosts Joel Elconin and Dennis Dick along with producer Spencer Israel.

For those who don't have the time to tune in live or listen to the podcast, Benzinga will highlight one stock that merits further discussion. This analysis is not a buy or sell recommendation.

A former Wall Street darling, International Business Machines (NYSE: IBM), reported earnings after Monday's close. It EPS and revenue beat along with the corresponding price action make it the PreMarket Prep Stock Of The Day.

Is It Really A Tech Stock? At the onset of the discussion on Big Blue, co-host Dennis Dick questioned (tongue in cheek) if it really was a tech stock.

"It is more of a value stock," he said, meaning owning the issue for its dividend as opposed to prospect for capital appreciation. He then compared the relative performance of IBM versus the QQQ and noted the glaring divergence between them, making IBM a "perennial underperformer."

Q2 Beat But Who Really Cares? Over the past few years, IBM has posted earnings beats, many times with revenue misses, and the issue has rallied immediately following the report. This quarter was similar as the company announced a second-quarter EPS beat of 11 cents along with a sales beat of $400 million.

View more earnings on IBM

The better-than-expected report did nothing to change the hosts' view of the issue and Dick remarked, "I don't care about the earnings report. I do not want to be long the stock."

After-Hours Price Action: As usual, the issue rallied off the good report in thin after-hours trading all the way from Monday’s close ($126.37) to $135.23. That high came within striking distance of its June 8 high of $135.88 and reversed course. It drifted lower to end the after-hours session at $132.25.

Price Action During The Show: When the issue was being discussed on today’s show, it was changing hands at $133 area.

The author of this article noted the issue's tendency to rally off the initial report but often surrender much of the gains during the regular session.

The hosts were unanimous in the opinion that if IBM did not hold its gains from the open, it was more than likely to sell off.

Price Action After The Open: After a higher open, it continued in that direction peaking well ahead of its after-hours high ($135.88) at $132.17 and sharply reversed course. It has continued to make lower lows, with $126.95 standing as the low of the day. If the decline continues, the next possible daily support levels would be Monday's close ($126.27) along with Monday’s low ($125.14).

The full discussion on the issue from today’s show can be found here:

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