Hewlett-Packard Company or HPQ in the New York Stock Exchange has been exchanging on a bearish track for the last couple of months. The first sign of the bad things to come was when the 50-day moving average (blue line) crossed below the 200-MA (red line). Over the last three months, its shares also failed to go beyond its previous high in April. Instead, it even registered successive lower lows during the same period. Last week alone, its stock experienced a loss of 12.5%. Ouch! A bearish breakaway gap during the beginning of last week highlighted the market’s negative sentiment towards it. It did not stop there as it also broke below the support of what appears to be a descending triangle.
At present, HPQ is trading just above 40.00. A break below 38.00 (its last major support), could send it to 30.00 which is the target as gauged by projecting the height of the triangle from the point of breakout. But since the RSI is already in the extreme oversold level, the HPQ could consolidate for awhile before heading south again. Note also that a breakaway gap is usually followed by another gap – the run-away. If this true then you better start to at least lighten your positions.
Anyway, last week’s bloodbath started when the company’s CEO, Mark Hurd, resigned from his position. This June, a female marketing contractor for HP approached the company’s board of directors and said that Hurd had sexually harassed her. The board concluded that he did not violate the company’s sexual harassment policy though it was found that he had falsified some expense report documents to conceal his “close personal relationship” with the contractor. This scandal gravely undermined his credibility and the market’s sentiment towards the company. With the company’s leadership now in transition, expect its shares to dip at least in the short term.