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HWP's Pain

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Hewlett Packard (HWP) is suffering immensely today after the company reduced its earnings expectations to 35 cents to 40 cents a share for the first quarter due to "worsening economic conditions and a deceleration in corporate and consumer IT spending in recent weeks." CEO Carly Fiorina noted in the press release that "December was like somebody turned the lights out." From the 60-Minute chart below, the lights have been on dim mode for some time.

Hewlett Packard - 60 Minute Chart

The question really becomes: Is all of the news built into the stock? We think not. A peek at the weekly chart of Hewlett gives some clue as to where shares may trade in the near term. As the stock has compromised the 200-period moving average on the weekly chart, it seems likely that a retest of the lows from 10/24/99 of $26.19 is imminent for HWP.

HWP - Weekly Chart

Those that take interest in this idea and would want to look at entering a short position, have a couple of options. First, less conservative and day traders would want to enter a position near this level with a target of $30.00. The more conservative traders may want to wait for a bounce off of the 200-period moving average near the $33.38 point on the chart. The target for longer term or swing traders would be for HWP to take out the lows from 10/99, or $26.00.

This seems likely in my opinion, as the digesting of the news from the analyst community has yet to be completed. With only one of the many firms that follow HWP downgrading the company this morning, we think more negative comments from the sell side analysts will be forthcoming in the next few days.

QQQ's Bending But Not Breaking

Buying support for the Q's near $63.00 dried up and now resides at the $62.50 level. As the Dow continues to weaken, it seems probable that the QQQ's will attempt a retest of the daily lows at $61.50. Just as the Dow was holding back gains in the COMPX, the triple digit losses in the index are now bringing the technology heavy NASDAQ with it.

Nasdaq 100 Index Tracking Stock - 10 Minute

As we press further into the close, traders should watch the Dow closely for a break below the 10,500 point. The shorter-term trend line that started in late December would be compromised with a close below this level, and could trigger program sell orders, further weakening the COMPX.

As this is my last writing of the day, I now pass the intraday updates torch to Eric Utley, fellow staff editor, for the balance of the day. I hope the pieces have been helpful in your trading day.

Derek E. Baltimore
Staff Editor

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