What do the Charts Show for HPQ? A Daily and Weekly View

Aug 9, 2010: 7:25 PM CST

After the sudden resignation of Hewlett-Packard (HPQ) CEO Mark Hurd last Friday, shares plunged 8% overnight and through Monday’s trading session.

Strangely enough, shares stopped falling at a critical chart support level – so let’s take a look at what the charts are saying for the reference price levels investors should be watching.

First, HPQ Daily:

The daily chart offers a support level at $42.50 and $42.00 per share – which is roughly where price trades currently.

Cutting to the chase – the main question is whether or not support at $42.00 per share will hold… or more specifically, if longer term investors see the 8% ‘haircut’ as an opportunity to buy undervalued shares quickly for future appreciation.

However, a price break under $42 – key support – will likely trigger a good number of short-term and perhaps even some intermediate and long-term traders/investors to sell shares for fear of future price declines.

Keep in mind shares were priced at the $54 level at the market peak in April – shares are now down 22% or $12.00 from that peak.  Does that represent value… or increased risk of further price deterioration?

That’s a question investors must now face.  What happens here at the chart level support at $42 should give us a sneak-peak to the answer.

Finally, the higher timeframe weekly chart:

Let’s get a little more detailed in our chart journey.

First, I drew a Fibonacci Retracement reference grid, which shows that price just nipped under the 38.2% retracement price at $43.39 – and if sellers push price under the $42 support, look for a downward spike to test the 50% level at $39.91 ($40 for easy-reference).

Any further selling under $40 could be met with “Fibonacci” buyers at the 61.8% retracement of $36.48 ($36.50 for easy reference).

The 61.8% level also correponds with a prior price low from the June ’09 lows.

The $40 level corresponds with the lower horizontal support of a prior price trading range from 2008.

If we don’t see a bounce off $42, look to be defensive and expect a likely move to test $40, and if buyers don’t step in at $40, then look for a price play to $36.50.

For alternate reference, the 20 and 50 week EMAs just crossed bearishly overhead at the $47.00 per share level, so that would be expected to provide “cradle” overhead resistance on any bounce off the $42 level.

Keep these levels in mind as you watch the charts and position in or out of this stock.

Corey Rosenbloom, CMT
Afraid to Trade.com

Follow Corey on Twitter:  http://twitter.com/afraidtotrade

6 Comments

6 Responses to “What do the Charts Show for HPQ? A Daily and Weekly View”

  1. Surprised And Saddened? « EconomicReview Journal Says:

    […] Investors were tormented, after the sudden resignation of Hewlett-Packard (HPQ) CEO Mark Hurd last Friday, shares plunged 8% overnight and through Monday’s trading session […]

  2. MadScientist Says:

    Hey Corey – –

    You draw the red arrow highlighting the negative divergence. But what about the positive divergence that is also being formed????

    I'm a buyer at any price under or close to $42. I'd sell if new momentum lower lows are created after that buy.

  3. Corey Rosenbloom, CMT Says:

    My eye is more drawn to the most recent momentum/price action, though you're right – there was a pos divergence – as was the case in the broader markets – on the push to the July low that – so far – resulted in a nice pop to the upside.

    If you're willing to take the risk of a tight stop under $42 or $40, it could very well be a good trade.

  4. MadScientist Says:

    Hmm… well, TNA's under $40.80 (that's the price target I was looking for the other day to enter). If new momentum lows are not created, then I'd buy this dip today some time.

    Same thing for HPQ – Wanted to see price near or under $42 – looks like we'll get that today… as well, as long as new momentum lows are not created, I'd buy it – for a short pop (at least).

  5. MadScientist Says:

    New momentum lows Corey using 30min intervals… very unsafe to buy (of course, you'd told us that a long time ago)!

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