Stocks quoted in this article:
Hewlett-Packard shares (HWP – 32) could be under some pressure this morning as a major brokerage firm reduced its rating on the shares from an "attractive" to a "neutral."
The early-November warning from Dell Computer (DELL - 18) regarding sales growth sent technology shares tumbling in sympathy. HWP was caught up in the swirl and suffered three bearish gap days, moving the shares closer toward the round-number 30 level.
This morning's downgrade may force the shares to test the last bastion of put support at the 30 strike. The stock is putting its faith in the 4,428 contracts on the front-month 30 put. But, as we have long stated, the reliability of puts strikes as support beneath a declining stock tends to be relatively dubious.
Should the equity breach this options-related support, the next level of potential technical protection resides at the 28 mark. This level marked previous highs for the shares in April and May 1998, and January and June 1999. It also defined the equity's nadir in October 1999.
On the options front, the highly speculative , out-of-the-money December 35 call was extremely active during Wednesday's session. Volume of 6,963 translated into 3,396 open positions.