Is Hewlett-Packard Poised to Head Higher?

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With shares of Hewlett-Packard (NYSE:HPQ) trading around $28, is  HPQ an OUTPERFORM, WAIT AND SEE, or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

T = Trends for a Stock’s Movement

Hewlett-Packard provides products, technologies, software, solutions, and services to individual consumers, small and medium businesses, and large enterprises worldwide. The company offers commercial notebooks and desktops, consumer notebooks, desktops, software, and services for the commercial and consumer markets. The services segment provides consulting, outsourcing, and technology services to infrastructure, applications, and business process domains. The diverse technological products and services offered by Hewlett-Packard make it a leading provider that sees increased demand through global expansion.

Hewlett-Packard announced on Monday that it’s coming closer to reaching a settlement with regulators over bribery charges that first came to light in 2010. HP made the announcement in its annual 10-K filing with the U.S. Securities and Exchange Commission, one of two regulators investigating the personal computer maker. Hewlett-Packard is also being investigated by the U.S. Department of Justice.

T = Technicals on the Stock Chart Are Strong

Hewlett-Packard stock has performed well over the past couple of months. The stock is currently trading sideways and may need time to consolidate before heading higher. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, Hewlett-Packard is trading above its rising key averages, which signals neutral to bullish price action in the near-term.

HPQ

Source: Thinkorswim

Taking a look at the implied volatility (red) and implied volatility skew levels of Hewlett-Packard options may help determine if investors are bullish, neutral, or bearish.

Implied Volatility (IV)

30-Day IV Percentile

90-Day IV Percentile

Hewlett-Packard options

33.94%

43%

40%

What does this mean? This means that investors or traders are buying a significant amount of call and put options contracts as compared to the last 30 and 90 trading days.

Put IV Skew

Call IV Skew

January Options

Flat

Average

February Options

Flat

Average

As of Tuesday, there is average demand from call buyers or sellers and low demand by put buyers or high demand by put sellers, all neutral to bullish over the next two months. To summarize, investors are buying a significant amount of call and put option contracts and are leaning neutral to bullish over the next two months.

On the next page, let’s take a look at the earnings and revenue growth rates and the conclusion.

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