HP Inc. (HPQ) shares soared 6.15% Friday after the company – known for its personal computers, laptops, and printers – smashed analysts' quarterly earnings expectations amid a surge in home PC demand during the pandemic.
- HP shares moved higher after testing the support of an ascending triangle's upper trendline.
- Western Digital Corporation (WDC) shares traded above a falling wedge pattern Friday to indicate a possible upside reversal.
- NetApp, Inc. (NTAP) shares broke above a descending triangle on above-average volume last week, which may see the stock test overhead resistance at $53.50 and $63.50.
For the quarter ended July 31, HP disclosed adjusted earnings of 49 cents per share, comfortably ahead of the Street's 42-cent estimate. Meanwhile, sales of $14.29 billion for the period came in 2.29% above the consensus mark. Although the firm's top line declined 2% year over year on weaker printer sales, revenues in its Personal Systems segment grew 7% as consumers made a run on notebooks to work remotely and prepare for homeschooling this fall. Trading at $19.85, with a market capitalization of $28.39 and issuing an attractive 3.77% dividend yield, HP stock has gained 33.42% over the past three months, outperforming the sector industry average by 20% over the same period as of Aug. 31, 2020.
Over the past week, HP shares have moved higher after testing the support of an ascending triangle's upper trendline. Also, the 50-day simple moving average (SMA) continues to merge toward the 200-day SMA, indicating a possible bullish golden cross buy signal in the weeks ahead. Active traders who buy at current levels should consider setting a take-profit order around $23.50, where price may encounter resistance from the 52-week high. Limit downside by cutting losses if the stock closes under the mid-August low at $17.81.
Traders who follow the group should also look at these two other hardware names that rallied in the wake of HP's upbeat quarterly performance.
Western Digital Corporation (WDC)
San Jose-based Western Digital manufactures and markets data storage devices and solutions globally. The maker of hard disk drives, solid-state drives, and cloud data center storage solutions reported fiscal fourth quarter earnings per share (EPS) of $1.23 on revenues of $4.29 billion. Both figures came in ahead of Wall Street expectations and improved from the year-ago quarter on the back of strong demand for data center storage. As of Aug. 31, 2020, Western Digital stock has fallen 13% over the past three months.
The stock broke down below crucial support at $37.50 in early August after providing soft first quarter guidance during its latest earnings call. However, price staged an impressive breakout Friday above the top trendline of a falling wedge pattern. Those who buy here should look to book profits near $47.50, where the stock finds a confluence of overhead resistance from a horizontal trendline and downward-sloping 200-day SMA. Protect capital with a stop placed under the recent swing low at $33.53.
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NetApp, Inc. (NTAP)
NetApp, Inc. provides enterprise data management and storage solutions. The $10.15 billion firm posted fiscal first quarter 2021 EPS of 73 cents to deliver an 83% earnings surprise. The bottom line improved 12% from a year ago thanks to demand for the company's file, block, and object software, as well as public cloud services. The company's Hardware Maintenance division saw sales increase by 9.6% year over year. NetApp yields a tidy 4.37% and is up 4.69% since late May as of Aug. 31, 2020.
Despite trading under the 200-day SMA, price broke above a descending triangle on above-average volume last week to indicate a possible move back to the upside. Traders who buy the stock should think about scaling out at $53.50 and $63.50 – both key areas of overhead resistance. Keep risk in check by placing a stop beneath this month's low at $40.08.
A descending triangle is a bearish chart pattern used in technical analysis that is created by drawing one trendline that connects a series of lower highs and a second horizontal trendline that connects a series of lows.
Disclosure: The author held no positions in the abovementioned securities at the time of publication.