The Battle of the Desktop Kings (cough, cough)

Hewlett-Packard (ticker: $HPQ) reported earnings this morning and was soundly pummeled by the market, down over 9% as I write this at 11:35am. Dell (ticker: $DELL) is reporting tonight and is flat on the day. This smells like an opportunity to me.

Trade Idea: Long HPQ vs Short DELL

Yes you are reading that correctly. A few quick points on 3 charts explain why.

DELL is in a recent pullback but the key point on this chart is that the Moving Average Convergence Divergence (MACD) indicator is about to cross negative. This is a bearish signal and confirms with the falling Relative Strength Index (RSI ) and price action.

Although HPQ is getting hammered it is holding now at the 61.8% retracement of the move higher off of the 2009 lows at 36.19. It is also well outside of the lower Bollinger band and becoming oversold. It may continue lower but certainly not at this pace.

The clincher is the ratio chart. The ratio of DELL to HPQ has been in an uptrend since mid April, but today’s move has that trend extended. It is out of the Bollinger bands and has an RSI over 80 now, where it has failed twice before in this picture. Use a move over of 0.45 as a stop, and look for a reversion back to the 0.41-0.42 area for a swing trade.

As always you can see details of individual charts and more on my StockTwits feed and on chartly.)

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The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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