Hewlett Packard Enterprises Co: Reasons to Be Bullish on HPE Stock

HPE StockHPE Stock: Systematically Bullish

I am bullish on Hewlett Packard Enterprises Co (NYSE:HPE) stock and, from my perspective, for all the right reasons. I purchase investments in hopes of making a profit. The profit I seek is not without costs; there are always inherent risks in every investment. So that becomes the ultimate trade-off in every prospective investment: “how much can I potentially make on this?” versus “what is my potential loss if my premise goes awry?”

This process is actually simpler than it sounds. I use charts to set my objectives and to define my risk. I look at defined chart patterns that can produce price objectives and trend lines to define my risk. I choose to highlight Hewlett Packard stock because the chart is constructive and I can get the values I seek to set up my investment strategy.

The following chart illustrates the uptrend line in Hewlett Packard stock.



Chart courtesy of StockCharts.com

This uptrend line on the HPE stock chart is a beautiful thing, and it is picture-perfect. An uptrend line is created by connecting the troughs on a price chart. An uptrend is confirmed when when the price plotted on a chart makes higher highs that coincide with higher lows. The pattern is unmistakable as the trend moves from the lower left to the upper right on the chart. This trend line also ensures that my trading bias is bullish as long as HPE stock trades above it.

If I were to assume a position in Hewlett Packard stock, I would use this uptrend line to define my risk. I would do this by setting a stop-loss directly below this line.  This uptrend line is dynamic and increases on a daily basis, thus my stop-loss level would need to be adjusted periodically.

The following chart illustrates positive developments in the HPE stock chart that are projecting a higher price.


Chart courtesy of StockCharts.com

During the entire month of August, HPE stock traded within a small range. Hewlett Packard stock attempted to break higher toward new highs, but the price level of $22.20 turned the share price away on more than one occasion. This level is marked on that chart as resistance.

On the chart, you will notice the lower panel labeled as “MACD.” Moving average convergence divergence (MACD) is a simple and effective trend-following momentum indicator. Signal line crossings are used to distinguish between bullish and bearish signals. A bullish signal tells you that the bullish momentum is increasing, and that the bullish camp is now in control and driving prices.

HPE stock broke out to a new high on September 19, 2016; that coincided exactly with a bullish cross on the MACD indicator. The bulls are clearly in control of this ticker.

The following Hewlett Packard stock chart illustrates the meaning behind the breakout.


Chart courtesy of StockCharts.com

The price action above reaffirms the bullish premise. If I use the low in June at $17.00 and I assume that the surge in price is the flagpole, then the resistance level and trading range in August must constitute the flag.

Flag and flagpole patterns are great from my perspective because they provide the much-needed price objective I seek. Flags are notorious for marking midpoints, and on balance they are continuation patterns. If I am to assume this, then the price objective In HPE stock after the breakout is $25.50.

At the current price of $22.68, the potential reward is $2.82, and my potential loss is $1.68.  It isn’t the greatest risk-reward ratio of 1.67, but constructive nonetheless. The emphasis regarding my trading strategy is that I define my exits prior to initiating a position. This allows me the ability to set my position and wait for one of two outcomes.

The Bottom Line on Hewlett Packard Stock

The HPE stock chart is a bullish delight, and my bullish bias is solely derived from this price chart. My bias will remain bullish for as long as the uptrend in Hewlett Packard stock remains intact.