HP Inc.: Buying Frenzy Could Send HPQ Stock Soaring

HPQ StockHPQ Stock: Bullish Tailwinds

HP Inc. (NYSE:HPQ) stock represents a good showcase piece that I can use to demonstrate my strategic systematic system to produce a trading bias. Being on the right side of a trade is an important aspect of any successful strategy. No strategy is foolproof, so defining your risk is always the no. 1 objective.

I chose HPQ stock because there are numerous technical signals that helped define and confirm the trend, both to the downside and the upside. These signals are tools that I use to decipher a trend with the goal of increasing the chances that I am on the right side of a trade. HPQ stock is currently bullish and the following signals support this view.

The following chart illustrates how moving averages confirm trends.

HP Inc. NYSE Chart

Chart courtesy of StockCharts.com

On March 30, 2015, HPQ stock generated a “death cross.” A death cross is a bearish signal that is produced when a 50-day moving average (highlighted in blue), crosses above a 200-day moving average (highlighted in red). Traders use this signal to confirm that a bear market is on the horizon. It is usually wise to trade in the direction of this signal. A trader would either be short or neutral in the face of this signal; in fact, this signal alone would have produced, or avoided, a 37% drop in share price.

The same signal reversed itself on May 5 and generated a “golden cross.” A golden cross is the exact opposite of a death cross and signals a bull market is on the horizon. Traders will be either long or neutral after this signal is generated. If you’re wondering, one would be up 27% using this indicator.

One indicator can be useful, but multiple signals are needed to confirm a trend.

The following chart illustrates how share volume can be used as a signal.


Chart courtesy of StockCharts.com

The focus on this chart is the on-balance volume (OBV) indicator. This indicator uses volume to compute buying and selling pressure. It is produced by cumulatively adding volume on up days and subtracting volume on down days. The data is then plotted on a chart. This indicator is used as a leading indicator, as well as to confirm the current trend.

In February, HPQ stock went on to make a new low. OBV did not confirm this new low by making a new low. This was the first sign that a trend reversal was in the making as, by definition, it means the current downtrend is losing momentum. The current surge higher in share price is confirmed by the OBV. HPQ stock is making higher highs and the OBV is confirming the trend, as it too is making higher highs.

So how high can the HPQ stock price go? The following chart will help produce a target.


Chart courtesy of StockCharts.com

The current trend is higher and is confirmed by multiple indicators. It is wise to see where resistance may be present that could possibly halt the current trend.

Fibonacci retracement numbers (highlighted in green) are a very popular tool used by many technical traders. This tool is used to identify counter-trend price objectives. In theory, when a stock pulls back from a primary trend, shares will retrace about 50% to 62% of the primary move. This zone usually offers resistance, as traders will be eyeing this area as an area to exit long positions or initiate short positions. Traders refer to this zone as “the box.”

The box is going to cause initial resistance for share prices, but the OBV and the golden cross are suggesting that the bullish pressure remains strong and that this level will eventually be broken. This would suggest that a full retracement was in order, and that the 2015 high of $17.80 will be tested. This represents the last level of price resistance.

Bottom Line on HPQ Stock

An effective trading strategy is a systematic one. Using signals as a tool to gain an edge will help a trader capitalize on their objectives. These same tools will also warn a trader if the trade is moving against them, as countersignals will execute. My tools that I use to discern trends are currently on bullish signals, thus my bias is for further gains from HPQ stock.