Hewlett Packard Enterprise (HPE) was hit hard amid the global tech selloff this week, dropping a combined 12.3% Monday through Tuesday. The shares are staging a bounce today, however, up 2.5% at $21.99 at last glance. And the even better news is that the recent drawdown has HPE testing a historically bullish moving average.
Buy The Dip
The trendline in question is the shares’ 126-day moving average, which represents half a year’s worth of trading days. Per Schaeffer’s Senior Quantitative Analyst Rocky White, Hewlett Packard Enterprise stock has traded down to this trendline five times in the last three years after a significant period above it. For the purpose of this study, White defines that as the equity trading above the moving average for 80% of the time over the past two months and closing north of the trendline in eight of the last 10 sessions, before getting within striking distance of the moving average. According to White’s data, the stock was higher one month later 80% of the time with an average 6.7% gain.
Stock Outperformance
HPE hit a Jan. 22 record high of $24.66 before this week’s pullback, and sports a 39% year-over-year lead. Despite this, puts have been more popular than usual in the options pits, per the stock’s 50-day put/call volume ratio at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) that ranks higher than 96% of readings from the past year. An unwinding of some of this pessimism could provide tailwinds.