Thursday, 20.04.2017, 13:52

Dow Jones Pulled Sharply Down by IBM Common Stock (NYSE: IBM)

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Published in Stock Markets Insight

The three most popular U.S. indices got over the period that were recording continuously all-time record highs and entered a retracement phase. Dow Jones Industrial average is down more than 1.20% to 20,372.00 so far, in April, while it slipped 0.72% in March after its top at 21,171.40. S&P 500 sank over 1% to 2325.62 in April, coming from marginal losses the previous month. The two indices have a similar performance which accelerated to the downside in the current period of earnings releases.

Dow Jones Industrial Average – Technical Outlook
The Dow Jones Industrial Average started a retracement after the bounce off the fresh all-time high at 21171.40 which recorded early in the previous month. Since March the index plummeted almost 800 points and posted a two-month low at 20,372.00 which overlaps with the 100-daily SMA. Currently, the price is approaching the 23.6% Fibonacci retracement level with low at 17,060.00 and high at 21,171.00, near 20,203.00.

However, if the price rebounds on the aforementioned SMA, we would expect a run towards the 20,890.00 resistance barrier. The technical indicators seem to be in contrast. The Relative Strength Index (RSI) is holding in the negative territory and is sloping to the upside whilst the MACD oscillator plunged below its trigger line with strong momentum.
Worst-Performing Blue Chip Stocks of the Month
The biggest pull to the downside of the Dow Jones Industrial Average was Goldman Sachs (NYSE: GS; $214.07) which dropped more than 8% in a month. The earnings report of the company for the first quarter of 2017, released on April 18th, revealed that EPS were $5.15, below estimations of $5.27 plunging the share price.
The second worst performing stock is not far away. International Business Machines (NYSE: IBM; $161.65), the fifth-most influential company in Dow Jones, dropped 7% the last month, and had a big impact on the index’s performance. The American multinational technology company reported net income of $1.75 billion, or $1.85 a share in the first quarter of the year, compared with $2 billion, or $2.09 a share, in the year-earlier period. Even though the company reported earnings of $2.38 a share versus $2.35 expected, it was not enough to support the stock price. Following the report, IBM stock had the biggest one-day drop since June leading the price at its weakest level since December.

IBM (NYSE: IBM) – Technical Outlook
The IMB stock opened with a gap to the downside over yesterday’s trading session and managed to challenge the short-term ascending trend line. Additionally, it should be noted that the short-term rising trend line, which dates back in June of 2016, continues to provide a significant support to the price action. The price after the sell-off hit the 50.0% Fibonacci retracement level with low at $145.45 and high at $182.75 and if the price surpasses the $162.60 resistance level, it will open the door for $165.00 which overlaps with the 200-daily SMA. On the other hand, a continuation of the free fall will expose the stock price towards 61.8% fibo level at $158.00. The technical indicators are confirming our second thought as both are holding in oversold areas. The MACD oscillator declined below its trigger line while the RSI indicator lies below the 30 level.


Best-Performing Blue Chip Stocks of the Month
On the other hand, the best performed stock of the blue-chip index, the last month, was the Wal-Mart Stores (NYSE: WMT; $74.07) which is an American multinational retailing corporation that operates as a chain of hypermarkets, discount department stores, and grocery stores. The stock surged almost 6% in this period, while the second in order best performed stock was McDonald’s Corporation (NYSE: MCD; $132.62) which soared slightly more than 3%.
Both stocks gained its upward strength from its strong earnings report for Q1. The Wal-Mart Stores announced quarterly earnings of $1.3 a share versus $0.97 a share expected whilst the McDonald’s earnings per share beat also the predictions and rose at $1.43 against $1.33 expected.

Best and Worst Performing Stocks of S&P 500 & Nasdaq Composite
The S&P 500 index plunged more than 1% so far this month following the rebound on the all-time high at 2401.28. The index started a retracement to the downside in April and one of the companies that influenced negatively the index is IBM and Goldman Sachs mentioned above.
The Nasdaq Composite Index is not performing like the other two popular U.S. indices, Dow Jones and S&P 500. The high-index exposed sharply higher in the previous five months and added at its value almost 13% while in the current month the price recorded a fresh all-time high at 5480. In the current month, the stock is slipped 0.43% so far. The stock with the highest positive performance included among the stock components was HTG Molecular Diagnostics (NASDAQ: HTGM; $5.51) which jumped more than 186%.


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