STX Stock: Bullish Indications
Seagate Technology PLC (NASDAQ:STX) stock has been a great-performing asset ever since I first crossed paths with it in the fall of last year. I knew right away that this investment was a winner, and it was the subject of my publication “Seagate Technology PLC: The Bullish Trend in STX Stock Has Only Begun.”
In that report, I outlined the key developments which suggested that a substantial bottom had formed and, as a result, higher stock prices were likely to follow. These suggestions proved to be correct, as STX stock is currently up 36.8% since that fateful day. Seagate stock is a great candidate for an applicable trading strategy because it abides well to technical indicators and price patterns. These indications are once again suggesting that higher prices are on the horizon.
My bullish view on Seagate stock is based on my understanding of technical analysis. This method of investment analysis is predicated on the notion that historical price and volume data can be used to discern a price trend and forecast future prices. So, as a result, I take my cues from the indications on a company’s price chart. These cues will define whether the investment offers a compelling opportunity.
I have spent two decades refining my skill in this craft, and have developed a level of proficiency that has translated into success by using technical analysis on applicable investment strategies.
The following STX stock chart illustrates the technical developments which are suggesting that an advance is on the horizon.
Chart courtesy of StockCharts.com
The price chart above illustrates the beautiful bullish price action that has encompassed the chart after shares bottomed in May 2016. This beautiful price action captures the quintessential characteristic of a bullish trend that consists of higher highs and higher lows. This characteristic serves to create the stereotypical price chart we are so familiar with: the one that begins in the lower left and ends in the upper right.
This bullish trend is impressively captured by using an ascending channel. This ascending channel is created by using two upward-sloping trend lines. The lower trend line represents support, while the upper trend line represents resistance. In theory, this trend can continue indefinitely as long as the price is contained within it, oscillating between levels of support and resistance.
The bullish trend has been supported by a golden cross that was generated in August 2016. A golden cross is a bullish signal that is produced when the 50-day moving average, highlighted in blue, crosses above the 200-day moving average, highlighted in red. This indicator is used to confirm that a bull market is in development. This indicator remains firmly intact as STX’s stock price remains above both moving averages that generated the bullish signal. This suggests that the bullish tailwinds generated by this indicator are still in force, and that higher prices can still be expected.
The bullish view is being further reinforced by the moving average convergence/divergence (MACD) indicator. MACD is a simple yet effective trend-following momentum indicator that uses signal-line crossings to distinguish between bullish and bearish momentum. In April 2017, a bullish cross was generated, suggesting that bullish momentum is now propelling Seagate stock, and, as a result, the path of least resistance is geared towards higher prices.
There is a price pattern that is in development just above support outlined by the ascending channel. The bullish MACD cross should provide the required fuel to complete this technical price pattern and send price moving higher.
The technical price pattern in question is illustrated on the following Seagate stock chart.
Chart courtesy of StockCharts.com
The technical price pattern that is currently in development is a “cup & handle” pattern. This technical price pattern develops as a stock reaches a level of resistance and a sell-off ensues. The second time it reaches this level of resistance, a smaller reaction ensues. These reactions off the same level of resistance create the cup & handle pattern.
This pattern is complete when the price finally breaks above the level of resistance that thwarted any further gains on the previous two attempts. A completed cup & handle pattern suggests that higher prices are likely and, as a result, this pattern suggests that the predominant trend towards higher prices is set to continue.
This pattern is useful on many fronts and, aside from suggesting that the predominant trend is going to continue, this pattern is also instrumental in generating a potential price objective. This price objective is obtained by taking the depth of the cup and extrapolating it above the level of resistance that had contained the price. Applying this metric to the pattern above generates a potential price objective of $55.00 on STX stock.
Bottom Line on Seagate Stock
I continue to hold a bullish view on Seagate stock, because it continues to trade within the confines of an ascending channel. Current indications suggest that the trend towards higher prices is firmly intact. Therefore, higher prices can be expected. I will continue to hold a bullish view on STX stock until there are indications on the price chart that suggest another view is warranted.