HPE Stock: In Perfect Alignment
There is definitely some nostalgia in a name like Hewlett Packard Enterprise Co (NYSE:HPE) stock. HPE stock brings back memories of the dotcom bubble, and how I was led into a stock market mania that was simply an awe-inspiring experience.
Overnight millionaires were a stock market-made phenomenon, and an investment in a company like Hewlett Packard Enterprise stock was deemed sexy. Wow, what an era that was! That was my first taste of the stock market, and it was all I needed because I was instantly hooked.
I am still hooked, and this market addiction has led me on a journey where being acquainted with price movements has become a daily occurrence that has spanned two decades, with no end in sight. This passion/addiction has developed into something quite amazing. And, if you have become a loyal follower of my publications, then you too, understand.
In this amount of time, I have discovered that technical analysis, specifically pattern recognition, is a legitimate method of investment analysis. It’s legitimate for the simple reason that it works. It’s not perfect in any way, but nonetheless, it still works.
This method of investment analysis is based on historical price and volume data. This data is used to discern the predominant trend and, on occasion, it has the ability to forecast future prices. Sounds ridiculous? Of course it does. But, if it’s used in a strategic setting, the results can be quite astonishing.
I am focusing on Hewlett Packard Enterprise stock because I have reason to believe that higher stock prices are on the horizon. This belief stems from the indications that are currently being generated on the company’s price chart.
The following HPE stock chart illustrates the technical indicators that are in perfect alignment for a run toward higher prices to occur.
Chart courtesy of StockCharts.com
There are currently two factors on the HPE stock chart above that can simultaneously generate bullish indications. These bullish factors would strongly suggest that higher prices are likely to follow.
The first factor stems from the constructive price action that has characterized this bullish advance. The advance began in January 2016, shortly after Hewlett Packard enterprises was spun off from HP Inc (NYSE:HPQ). This constructive price action consists of a two-wave structure.
The first wave is an impulse wave, and its objective is to advance the price of the stock. This wave is highlighted in green on the price chart above. The second wave is a consolidation wave, and its objective is to unwind any overbought conditions that were created during the advance and, more importantly, set up the next advancing impulse wave. This wave is highlighted in purple.
This alternating wave structure is the essential building block that creates a sustainable trend.
HPE stock is currently within the confines of a consolidation wave. If the price exits this wave in an upward direction, it would serve to suggest that another impulse wave was set to develop, and that higher stock prices were likely to follow. Not only is this wave structure useful in suggesting the next direction the stock is going to take, it’s also instrumental in providing a potential price objective.
This potential price objective is generated by using the theory behind impulse waves that are separated by a consolidation wave. The theory states that the developing impulse wave has a tendency to mirror the initial impulse wave in terms of length. If I apply this theory to the price chart above, it produces a potential price objective of $26.00.
The second indication that higher prices are likely stems from the moving average convergence/divergence (MACD) indicator. MACD is a simple yet effective trend-following momentum indicator that uses signal-line crossings to distinguish between bullish and bearish momentum. This indicator is becoming well known for its ability to confirm the predominant wave that is in development.
In October 2016, a bearish MACD cross was generated. This bearish signal indicated that bearish momentum was propelling Hewlett Packard Enterprise stock and, as a result, the signal served to suggest that Hewlett Packard stock was geared toward lower prices. This indicator correctly suggested that the impulse wave was set to conclude, and it also opened the door for a consolidation wave to develop.
As I write this publication, a bullish cross is being generated. This bullish cross indicates that bullish momentum is set to propel HPE shares and that, as a result, the path of least resistance is geared toward higher stock prices. This indicator is suggesting that the consolidation wave is set to conclude, and that a new impulse wave is on the horizon.
All HPE stock needs to do is close above resistance outlined by the consolidation wave at $18.60, and this action would suggest that an advancing impulse wave is set to develop. The impulse wave is supported by the MACD indicator. Given that such a feat would also generate a new all-time high, the prospects for Hewlett Packard Enterprise stock are indeed very bullish.
Bottom Line on Hewlett Packard Enterprise Stock
The Hewlett Packard Enterprise stock chart is setting up to make an advance. This advance is supported by both price action and technical indicators. As a result, I am bullish on HPE stock, and will continue to be so until there are indications on the price chart which suggest that another view is warranted.