Morgan Stanley Pumps the Brakes on Computer Names

HPQ remains up over 31% in the last six months

Deputy Editor
Mar 31, 2022 at 10:22 AM
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HP Inc (NYSE:HPQ) is down 6.8% to trade at $36.22, after Morgan Stanley downgraded HPQ and Dell Technologies (DELL), cautioning against computer hardware names due to macroeconomic uncertainty. The firm lowered HPQ to "underweight" from "equal weight." 

Today's negative price action has HPQ ceding its year-to-date breakeven. Despite today's gap lower --likely exacerbated by broad market sluggishness -- the shares' 120-day moving average is in place as support, a trendline that late February and early-March weakness.

Put traders continue to build their case despite HPQ's 31% lead in the last six months. The security sports a 10-day put/call volume ratio of 4.84 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). This ratio stands higher than 97% of readings from the past year, which means long puts have been picked up at a much faster-than-usual pace in the last two weeks. 

There is plenty of short-covering potential as well. Short interest has increased by 34% in the most recent reporting period, and the 52.69 million shares sold short makes up 5% of HP stock's available float. It would take over four trading days to buy back these bearish bets, at HPQ's average pace of trading. 


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