IBM (NYSE:IBM) shares are consolidating on Thursday. This comes after a steep decline that was driven by a disappointing earnings report.
But they are at an important price level.
Important levels are like forks in the road. When stocks reach them, they tend not to stay at them for too long. They either break them or reverse. This is why IBM is the Stock of the Day.
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As you can see on the chart, $215 has been important for IBM. It was support in April 2025. Then it became support again in April and May of this year.
Stocks frequently find support at levels that had previously been support. This happens when people who sold at the initial support regret doing so after their stock rallies.
Some of them decided to repurchase their shares at the same price they were sold for. When IBM fell back to $215 in April, they started buying and this put a floor under the price.
A similar thing happened in May. People who sold around $215 in April entered buy orders, and this created support at the level again.
Sometimes stocks rally after they reach support.
This happens when some of the traders and investors who created the support become anxious and impatient. They know the sellers are going to whoever pays the highest price, and they don’t want to miss the trade.
As a result, they raise their bid prices. Other impatient buyers see this and do the same thing. This forces the shares into an uptrend.
But sometimes when stocks reach support, it breaks. The sellers eventually overpower the buyers, and the price heads lower.
With these buyers out of the way, sellers will need to undercut each other to attract buyers. This forces the shares into a downtrend.
An important price level is like a crossroads. No one can tell which way IBM will head. The savvy traders will wait for a trend to form before they take a position.
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