History Says HP Stock May Bounce Soon

Options traders have been extremely put-heavy toward HP stock

by Emma Duncan

Published on Oct 8, 2018 at 12:06 PM

Shares of HP Inc (NYSE:HPQ) are slightly lower in afternoon trading, last seen down 0.3% at $25.27. Although the tech stock has been a long-term outperformer, it recently pulled back to a historically bullish trendline and key level on the charts. Below, we will dive into how HP stock has been faring of late, and why now might be a good time to bet on the security's next leg higher.

HPQ had a volatile first half of 2018, but in August broke north of resistance in the $24 area. The shares subsequently touched a fresh 18-year high of $27.08 on Oct. 4, before pulling back with the broader equities market. HP stock is now within one standard deviation of its 40-day moving average -- a trendline that holds historically bullish implications for the tech name, and runs in-line with a 23.6% Fibonacci retracement of the stock's rally from its early February low to last week's high.

Daily Chart HPQ with 40MA and Fib Levels

As HPQ is now closing in on its 40-day trendline after a lengthy stretch above it, White notes that there have been eight similar signals of this kind over the past three years. After these eight signals, HP stock saw an average one-month gain of 3.42%, with a 75% success rate. Another surge of this magnitude would put the shares back near $26.13 -- approaching the aforementioned 18-year-high territory.

Meanwhile, at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), HPQ sports a 10-day put/call volume ratio of 2.15, ranking in the highest percentile of its annual range. This indicates that during the past two weeks of trading, more than double the amount of puts have been purchased over calls -- and at the fastest pace of the past 12 months. Should HPQ once again bounce from trendline support, an exodus of option bears could add fuel to the equity's fire.

Wrapping up, now may be an attractive time for near-term traders to hop onto HPQ with options. This is per the security's Schaeffer's Volatility Index (SVI) of 23%, which sits in the 27th percentile of its annual range. In other words, muted volatility expectations are being priced into short-term contracts


A Schaeffer's exclusive!

The Expert's Guide

Access your FREE trading earning announcements before it's too late!


  
 

Partnercenter


NEW! Explore Schaeffer’s Partners' deals and get connected to top online brokerages with deals tailored exclusively for our readers.  Get answers to your questions regarding transfer fees, commission rates, programs and available discounts related to online trading services.

MORE | MARKETstories


Research Exposes Shortcut to Stock Market Wins
A simple way to stop picking losers, and start cashing in like Wall Street's elite.
Cannabis Stock Rally Cut Short after Downgrade
Aurora Cannabis did receive a price-target hike from Jefferies, though
Vaccines, China Trigger Roller Coaster Week for Stocks
Moderna's vaccine captured the attention of Wall Street
Research Exposes Shortcut to Stock Market Wins
A simple way to stop picking losers, and start cashing in like Wall Street's elite.