Hewlett-Packard's Chart May Outweigh Earnings News (HPQ, DELL)

After today’s close, we get to see earnings out of Hewlett-Packard (NYSE: HPQ).  We gave a full earnings preview over the weekend but we have some updates for the options and the chart.  Tech traders will be paying close attention to aspects of the business,particularly how much "printing and imaging" contributes to the bottomline.

Options are still hard to use with more than 1 month to expiration, but today’s pricing indicates that options traders are prepared for H-P to move more than $2.00 in either direction.   What is perhaps more interesting than the news report is looking at its chart and factoring in these potential option anticipated moves.  H-P’s 50-day moving average is $46.71 and the even more rigid 200-day moving is $47.70.  That coincides highly with that $2.00+ expectation from options traders, so we’d be paying attention closely to those levels if shares try to stage a comeback after the earnings report.  Shares have also recently used this $40+ and $41 area for hard support in both January and February.

H-P shares have pulled back more than 20% from recent highs before recently recovering.  The chart activity after today’s report may be more telling than the actual earnings report.

This earnings report may also set the tone for Dell Inc. (NASDAQ: DELL) as well.  Dell shares have fallen worse than H-P shares over the last 90-days and the company is still trying to get its turnaround plan into overdrive.  Today’s news out of H-P may also further shape Dell’s trend as well. 

Jon C. Ogg
February 19, 2008