Is Tech Due for a Time Out?

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. And 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.

But 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. Perhaps more importantly, the Friday pullback takes the stock out of technically overbought territory, potentially muting any sharp reaction from spending too much time at extreme levels.

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.

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David Penn is Editor in Chief of TradingMarkets.com