Hewlett-Packard shows signs of resurrection

Hewlett-Packard HPQ �is showing the first signs of life after death as price breaks above the 200-day moving average reaching 18.15 in the after hours market Thursday. The 50-day moving average had already turned from a downtrend to an uptrend in January. This marks the fifth and probably final wave up from the bottom identified at 11.50 on the point-and-figure chart. Resistance is at 18 and 19.50.

This was a strong move up from the bottom doing everything you could ask from the first bounce up. When the bounce started, there was no assurance that the bottom was in place. But now it seems highly probable that 11.50 is the bottom. Price will probably move back to test the positive signals now in place.

At a minimum it could go back and test the 200-day at 17 and the 50-day at 16. There is price support at 15, 16 and 17.50. It is always possible it will go back and test the bottom at 11.50 or 13, but in view of the positive signals in place that seems unlikely short term. Longer term it would take a negative surprise to create a double bottom re-test at 11.50.

According to Finviz.com, one analyst raised the 12-month target from 12 to 16 in January. Nasdaq.com shows the mean analyst target before the earnings announcement at 13.50, and only one analyst buy rating out of 24. Considering the recent bottom, analysts and portfolio managers will be slow to reverse themselves. They will want to see the downside test of support and more proof the bottom is in place. A golden cross of the 50-day moving average above the 200-day would help to convince the bottom is definitely in place.

The quantitative system at StockPickerUSA.com had it as a 5-star buy before earnings were announced, and the valuation grid had it in box 1, undervalued. However, the analyst revision models were not picking up any analyst enthusiasm. The question is not one of value, but of the future business model and its viability. The good earnings report stopped price from dropping and created a bounce up, but will it turn the 200-day moving average up? That requires portfolio managers to start buying and that has not appeared on the monthly chart yet in terms of money flow, relative strength or on-balance volume.