HP (NYSE:HPQ) was moving up in a rising channel until it stalled in November. The rise morphed into a sideways consolidation, which held until the end of February. Then it gapped higher and settled into a new consolidation range. The flat tight range ran for 2 months until it broke out to the upside last week. The Thursday move pulled back Friday, but held the break out. A Measured Move would give a target to the upside to 20.
The RSI is rising in the bullish zone and is strong. The MACD is about to cross up, itself a bullish signal. There's resistance at 18.50 both here and from the beginning of 2015; then 19.75 and 22 followed by 24.50. Support lower comes at 17.85 and 17 followed by 16.25. Short interest is low at 1.6% and the company is expected to report earnings next on May 25.
The stock has weekly options and this week's open-interest majority is below the current price. There is large open interest at the 18.50 strike on the call side, but then it is big from 14 to 18 below. May options show size from 16 to 18 on the call side with a big chunk at the 16 puts. The May 26 Expiry options — the first after the next earnings report — are just getting started and have little activity so far. So a look at the June options shows the open interest at the 18 call strike dwarfing all other activity by a factor of 15x.
- Trade Idea 1: Buy the stock on a move over 18.50 with a stop at 17.75.
- Trade Idea 2: Buy the stock on a move over 18.50 with a May 26 Expiry 18/17 Put Spread (40 cents) and selling a June 20 Call (24 cent credit).
- Trade Idea 3: Buy the May 18 bullish Risk Reversal (29 cents).
- Trade Idea 4: Buy the June 18/May 19 Call Diagonal (79 cents).