Computer maker Dell (NASDAQ:DELL) hasn’t exactly been feeling the love from the media or the analytical community lately. Oh, it’s received a couple of upgrades — to “buys” — in the past few months, but its average ranking on a scale of 1.0 (strong buy) to 5.0 (strong sell) still is a pretty weak 2.3. And, most of those opinions are a mere “hold” — practically a “sell” recommendation within the bullish-biased stock analysis industry.

The media’s stock-picking gurus have been quick to criticize, too, pointing out that Dell is falling behind in the tablet race to competitors like Apple (NASDAQ:AAPL), falling behind in the cloud computing race and falling behind in the technology services race to total-solution providers like IBM (NYSE:IBM).

All those points and opinions have at least some merit. A funny thing happened on the way to Dell’s demise, though — the company reached record profit levels, and the stock’s knocking on the door of two-year highs.

Do As It Does, Not as I Say

Much of the time, stocks generally behave in a way that jives with the media’s outlook and/or analyst opinions. Sometimes, though, investors collectively recognize what the so-called pros refuse to see. In Dell’s case, the rank-and-file amateurs put the pedal to the metal in February, pushing it up from lows near $13 to the current price above $17. The 30% move easily trounces the market’s 4.5% gain for the same timeframe.

But what prompted the sudden strength?

Actually, it wasn’t all that sudden — it just became apparent against a bearish backdrop then. As for what had been driving Dell’s stock higher though, it was likely a combination of three different things.

• By that point in time, Dell had posted four straight quarterly earnings beats and topped estimates in nine of the prior 12 quarters. It was at this point traders probably started to realize the forecasters were systemically underestimating the computer manufacturer.
• The end of fiscal 2011 (which is pretty much calendar 2010) also brought about record-breaking per-share profits of $1.59, forcing the market to at least consider the possibility Dell had shrugged off the recession.
• While it technically had been cheaper before on a price-to-earnings ratio basis, the trailing P/E of 13.5 in February was well below the long-term average, and it actually was the cheapest Dell had been in over a decade while earnings were on the rise. (It was technically valued lower in 2008, but earnings were falling to who knows where then.)

All those things considered, it would have been surprising if Dell’s stock hadn’t made progress despite more than its fair share of naysayers.

Looking Ahead

While the stock’s been going strong, the shape of the chart here suggests the bullish pace could quicken very soon. Simply put, Dell is at a major inflection point, with the market’s hand being forced by two technical factors:

• There’s a ceiling between $17.30 and 17.60 (dashed lines) that’s capped rallies twice since the recovery began in 2009. This third effort to push past it is much better paced and much better supported, though.
• Since August of last year, Dell has been working its way into a pretty bullish wedge (framed by blue lines). Coming off of multiyear lows, this has strong bullish implications.

And, as you can see, the ceiling of the wedge and the horizontal ceiling are intercepting right now. If one breaks, the other breaks, unleashing technical bullishness on a couple of different ways.

What favors such a breakout move now is the fact that — despite a heroic run-up since February — Dell is even more affordable now than it was then; its trailing P/E is a mere 10.2.

While the forecast earnings per share of $1.91 for calendar 2011, and the corresponding projected P/E ratio of 9.0, seem almost too good to be true, don’t dismiss the possibility. Dell has earned more per share in each of the past two quarters than is forecast for any of the next four. And, we already know analysts are in the habit of underestimating this company.

Even if a breakout doesn’t materialize right away, though, Dell will remain in the hunt as long as all those support levels hold up — which they likely will.

James Brumley does not own any of the aforementioned stocks.