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We are going to discuss something today that is most likely near and dear to all of our hearts. One of the best inventions in recent history is the digital camera. It provides instant pictures, letting us know instantly whether the photo is what we wanted. Not too bright, not too dark, no more wondering if we got the shot or if we didn't. There is no more waiting for the pictures to be developed, no more pricey film, choosing the right speed or being limited with the number of pictures we can take.

Of course, with all these conveniences comes one large problem. What do we do with the photos? We can get them off the camera by downloading them to a PC. That's not the problem. Once they are downloaded, though, it's fun to look at them on the computer, but still we crave a more portable device, something that brings them into our everyday lives.

This is the greatest untapped part of the digital photo market. There are hundreds of millions of photos waiting to be printed. Companies like

Eastman Kodak




(HPQ) - Get HP Inc. Report

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have made all kinds of printers to simplify the process of printing pictures. However, it simply hasn't caught on, and these photos remain in obscurity on people's hard drives.

Well, one solution that has caught our attention is the digital photo frame. This product has improved to the point where it is basically a large storage unit with a small screen to display the picture. This means the user can download thousands of pictures to the device and look at them, displaying in a convenient and easily usable setting. That sounds like a good solution to us.

So who is making these devices? Well, a lot of big companies are, so we don't see this as a huge impact or category killer to any of these companies, because any one product will not have the impact it would on a smaller company. What it does do is feed into these companies' already strong performance and add to the prospects of that performance continuing.


Click here for larger image.

Source: Hewlett-Packard

Hewlett-Packard is one such company. This stock has been rallying since mid-2005 and has maintained this longer-term uptrend. During the recent market weakness, this issue has shown tremendous relative strength, holding on to most of its gains with very little pulling back. It has led to a period of lateral price action, forming a bullish consolidation.

Typically, these consolidations resolve to the upside, and we would expect this from HPQ. Look for a move above $49 to signal a completion of the consolidation and a further rally to the mid-$50s.

What is also attractive about HPQ is the overall strength we continue to see in the technology sector. The sector has also been an area of relative strength and one that continues to show signs of improvement. This background is another positive factor to help push H-P along.

At the time of publication, John Hughes and Scott Maragioglio had no positions in the stocks mentioned. Hughes and Maragioglio co-founded Epiphany Equity Research, which has developed and utilizes proprietary tools to identify and track liquidity changes in the market indices and sectors. Hughes advises numerous asset managers, hedge funds and institutions managing in excess of $30 billion. Maragioglio is a member of the market technicians association (MTA) as well as The American Association of Professional Technical Analysts (AAPTA) and holds a Chartered Market Technician (CMT) designation. Maragioglio has also served on the board of directors of the AAPTA.