Hewlett-Packard (NYSE: HPQ) is once again on my radar as a long-side play, with the stock trading in a tight pattern and coiling up nicely for a likely push past resistance sooner rather than later. The stock is displaying buying pressure and consolidation on the daily chart, and the longer-term chart offers good reference levels that match up with a near-term resistance area.

Typically, HPQ has a positive correlation, and thus price sensitivity, to movements in stocks like Intel (NASDAQ: INTC) and other chipmakers and semiconductor manufacturers. As such, when trading HPQ, it is important to keep a close eye on the semiconductor complex.#-ad_banner-#

One way to monitor this sector is via the Market Vectors Semiconductor ETF (NYSE: SMH), and right now that ETF shows the group remains constructively positioned.

Recently, HPQ announced a host of new all-in-one (AiO) PCs, including the company’s first AiO built for Google’s (NASDAQ: GOOG) Android operating system. The new PCs are equipped with larger HD displays and quick access features to the web, including easy access to the Google Play app store.

On the multi-year chart looking back to 2007, we see that HPQ is trading just marginally higher today than it was at the 2009 broader market lows. This is mainly due to the commoditization of the PC market, and there are other casualties in the space, with Dell (NASDAQ: DELL) being a prime example.

My main point of reference on this weekly chart is the downsloping diagonal blue line, which connects the dots of the highs we saw in April 2010 and February 2011. HPQ is currently bumping up against this line, making it a crucial area for the stock in this time frame.

For more perspective on the long-term chart, note that the stock behaves well technically if we consider the double-top from November 2007 and April 2010, as well as the inverse head-and-shoulders pattern that began developing in 2011 and is still being carved out.

In terms of the latter formation, after developing its head (the capitulation low in November 2012), a strong rally took hold that brought the stock back to the neckline of the formation.

An important part of the rally off the 2012 lows was the August/September correction/consolidation pattern, which took some of the froth out, allowing HPQ to reset, and also making a notable higher low.  

Moving on to the daily chart below, we see better how closely HPQ is snuggling up to this crossroad of diagonal and lateral resistance.

HPQ first arrived at lateral resistance on Dec. 4; however, it was rejected there, turning lower before staging a Santa Claus rally into year end, which brought it right back to this resistance area.

For the past two weeks, HPQ has been trading in an unusually tight range, right below this resistance area, thus coiling up for a likely push higher.

Action to Take –>

— Buy HPQ on a break above $28.50
— Set stop-loss at $28
— Set initial price target at $30 for a potential 5% gain in 3-6 weeks

This article originally appeared on ProfitableTrading.com:
Chart Says This Laggard Could Reward Buyers With a Quick Pop

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