Shares of printing and computing systems company Hewlett-Packard Company (NYSE:HPQ) rallied Monday alongside unusually large options volume. HPQ stock, along with some other “old tech” stocks, have been struggling year-to-date. However, as earnings season slowly unfolds, a bounce looks increasingly likely.
After a big multiyear rally, shares of Hewlett-Packard as well as other old tech stocks like Microsoft Corporation (NASDAQ:MSFT) and Intel Corporation (NASDAQ:INTC) began to correct early this year. This arguably was at least in part due to the rising dollar that’s expected to continue eating into the earnings of large multinationals, as they translate overseas sales back into dollars.
Indeed, the extent to which the rising dollar since has hurt earnings of S&P 500 companies will be a major focus for analysts and investors, and as such, it’s not surprising that the S&P 500 has struggled to gain real upside momentum thus far in 2015.
Specifically for HPQ stock, it was observed that Monday’s trading action saw unusually large options volume. Traders particularly gobbled up call options several hundred percent more than usual on any given day. Unusual options activity is a good way to gauge for potential future moves in the stock, as the “smart money” has a tendency to initially position itself in options.
HPQ Stock Charts
Looking at the multiyear weekly chart of HPQ stock, we see that after a 250% rally, Hewlett-Packard finally exhausted itself in late 2014/early 2015 and began to slide. By early March, the stock had broken below its late 2012 support line (lower black line) and in early April marginally undercut its October 2014 lows.
In the bigger picture, while the break of the 2012 support line is concerning, the stock has managed to roughly hold support at the blue area on the chart, which marks the lows from the spring of 2014 and the lows from last October.
If we take a closer-up look at the daily chart, we see that while downside momentum bottomed in early March, price managed to sneak to a marginal lower low in early April, giving us positive divergence and a promising sign of a better bounce.
After a couple of weeks of sideways trotting, HPQ stock then staged a nice two-day rally last Friday and on Monday that amounted to about 3.8%. As a result, HPQ on Monday overcame a first better diagonal resistance line from late February and is providing hope of a longer-lasting momentum move higher.
Active investors and traders could look to buy HPQ stock on a break above Monday’s intraday highs near $32.95 for a move into the $34.50 as a first upside target.
Like what you see? Sign up for our daily Beat the Bell e-letter and get investment advice delivered to your inbox every morning!
Download Serge’s trading plan in the Essence of Swing Trading e-book here. As of this writing, he did not hold a position in any of the aforementioned securities.
