Is It Time To Buy Hewlett-Packard Shares?

After the sudden resignation of Hewlett-Packard (HPQ: 42.33 0.00 0.00%) CEO Mark Hurd last Friday, shares plunged 8% overnight and through Monday's trading session.

Strangely enough, shares stopped falling at a critical chart support level - so let's take a look at what the charts are saying for the reference price levels investors should be watching.

First, HPQ Daily:

 

The daily chart offers a support level at $42.50 and $42.00 per share - which is roughly where price trades currently.

Cutting to the chase - the main question is whether or not support at $42.00 per share will hold… or more specifically, if longer term investors see the 8% 'haircut' as an opportunity to buy undervalued shares quickly for future appreciation.

However, a price break under $42 - key support - will likely trigger a good number of short-term and perhaps even some intermediate and long-term traders/investors to sell shares for fear of future price declines.

Keep in mind shares were priced at the $54 level at the market peak in April - shares are now down 22% or $12.00 from that peak.  Does that represent value… or increased risk of further price deterioration?

That's a question investors must now face.  What happens here at the chart level support at $42 should give us a sneak-peak to the answer.

Finally, the higher timeframe weekly chart:

 

Let's get a little more detailed in our chart journey.

First, I drew a Fibonacci Retracement reference grid, which shows that price just nipped under the 38.2% retracement price at $43.39 - and if sellers push price under the $42 support, look for a downward spike to test the 50% level at $39.91 ($40 for easy-reference).

Any further selling under $40 could be met with "Fibonacci" buyers at the 61.8% retracement of $36.48 ($36.50 for easy reference).

The 61.8% level also corresponds with a prior price low from the June '09 lows.

The $40 level corresponds with the lower horizontal support of a prior price trading range from 2008.

If we don't see a bounce off $42, look to be defensive and expect a likely move to test $40, and if buyers don't step in at $40, then look for a price play to $36.50.

For alternate reference, the 20 and 50 week EMAs just crossed bearishly overhead at the $47.00 per share level, so that would be expected to provide "cradle" overhead resistance on any bounce off the $42 level.

Keep these levels in mind as you watch the charts and position in or out of this stock.