Trading Strategies For HP Stock Heading Into Q4 Earnings

Zinger Key Points
  • HP is trading in a strong uptrend, giving back about 50% of each bullish move north on retracements.
  • Several analysts cut price targets on HP, citing macro concerns.

HP, Inc HPQ is set to print its fourth-quarter and full-year 2022 financial results after the market closes on Tuesday, and the stock was popping slightly higher heading into the report.

When HP printed its third-quarter earnings, the stock plunged 7.81% the following day and continued in a downtrend over the weeks that followed, sliding over 15% to reach a 52-week low of $24.08.

For that quarter, revenue decreased 4.1% year-over-year to $14.7 billion, which missed average analyst estimates of revenues of $15.74 billion. The company reported quarterly earnings of $1.04 per share, which was in line with average analyst estimates.

Reflecting overall macro weakness, HP cut full year 2022 non-GAAP EPS guidance and lowered free cash flow guidance.

Ahead of the event, several analysts weighed in on HP, with two firms cutting their price targets based on a number of factors including continued macro concerns.

BofA Securites analyst Wamsi Mohan maintained an underperform rating on HP and lowered the price target from $30 to $27. Citigroup analyst Jim Suva maintained a Neutral rating on the stock and cut the price target from $33 to $31.

From a technical analysis perspective, HP’s stock looks bullish over the long-term, having settled into an uptrend on the daily chart.

It should be noted that holding stocks or options over an earnings print is akin to gambling because stocks can react bullishly to an earnings miss and bearishly to an earnings beat.

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The HP Chart: HP reversed into an uptrend on Oct. 13 after hitting a new 52-week low and has since formed a series of higher highs and higher lows. The most recent higher high was printed at the $31.09 mark on Nov. 15 and the most recent confirmed lower was formed on Nov. 17 at $28.31.

  • Using a Fibonacci retracement tool, HP’s two largest retracements to the downside shaved 50% of the stock’s prior gains. If HP receives a positive reaction to its earnings print and continues in its trend, the 50% retracement has occurred and the stock could take another run higher.
  • If that happens, bullish traders can watch for a bearish reversal candlestick to print at one of the important Fibonacci levels, possibly the 0.618% to 0.65% level ($31 mark). If HP busts through that area, the stock could complete the full 100% move and surge toward $33.53.
  • If HP suffers a bearish reaction to its earnings print and falls under the $28.30 area, the uptrend will be negated by the creation of a lower low.
  • HP has resistance above at $29.50 and $31.05 and support below at $27.72 and $24.74.
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