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Hewlett-Packard Looking Better Than Dell Going Into Earnings

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HPQ Reports 2/22 - Image by Getty Images

With Apple (NASDAQ: AAPL), Samsung and a host of others doing everything in their power to reduce the relevance of the PC, what should traders and investors make of the profit-taking in stocks like Dell (NASDAQ: DELL) and Hewlett-Packard (NYSE: HPQ) as both approach quarterly earnings announcements?

While both stocks are at new, short-term highs, it is Dell that has earned the greater appreciation from the market. Shares of Dell broke out above their 200-day moving average in the first half of January as part of a major rally during which the stock closed higher for 12 out of 14 days. This advance included a streak of six consecutive higher closes en route to taking the stock to new, intermediate-term highs.

After a brief correction lasting less than a week, DELL was back on the move, eventually setting new, 52-week highs near the beginning of the month.

Selling in recent days has done a lot to moderate the overbought conditions in Dell. The stock is now set to open in neutral territory, with a short-term edge of less than half a percent, when trading begins Tuesday morning. For traders still looking to take profits, DELL's Tuesday announcement could catalyze selling.

By comparison, shares of Hewlett-Packard are trading nearly 40% below their level a year ago. It was in February of 2011 that the stock gapped lower, plunging below its 200-day moving average, and trading below that level not just for the entire balance of 2011, but for the first month and a half of 2012, as well.

Shares of HPQ climbed into bull market territory on Thursday, during a four-day rally that left the stock overbought in the short-term and vulnerable to the selling that has taken HPQ lower by 1% in Friday's session. The Friday pullback takes the stock out of technically overbought territory.

HPQ shares with DELL a positive, short-term edge of less than half a percent, and neutral ratings of 4 and 5 out of 10, respectively.

Want to learn more about trading oversold markets? Coming Spring 2012: the second edition of How Markets Really Work: A Quantitative Guide to Stock Market Behavior by Larry Connors and Cesar Alvarez. Click here to learn more.

David Penn is Editor in Chief of TradingMarkets.com