STX Stock: Technically Obedient
Seagate Technology PLC (NASDAQ:STX) operates within the storage network device sector, which is currently attracting quite a bit of speculative money flows. The NASDAQ is adding fuel to the fire in this hot sector as this index continues to forge new highs at a relentless pace. Aside from being a stock that is in a sector in favor by investors, Seagate stock also sports an impressive 5.38% dividend yield. On a fundamental basis, this may be grounds to invest in STX stock. But for my intended purposes, I require more timely information to base an investment decision.
The only method of analysis that I have come across that has the ability to produce a timely edge is technical analysis. This method of investment analysis is based on the notion that historical price and volume data can be used to discern trends and forecast future prices. I have been refining my skills in this method for nearly two decades and have become proficient in analyzing a price chart. Technical analysis has become the cornerstone of my investment strategies.
On January 13, I published the report “Seagate Technology PLC: STX Stock Presents an Opportunity.” In that publication, I outlined that there were certain characteristics that I look for in an investment and these characteristics were suggesting that it was an opportune time to look at Seagate shares. It was presenting a great opportunity to apply a relevant trading strategy.
At the time of the report, Seagate shares were trading at $36.90, and now those same shares are trading at around $47.00. In under three months, this opportunity produced a 27% return. Not only was my analysis spot on, which should provide some merit to my madness, but now there is little to suggest that Seagate cannot continue its advance. As a result, I can only believe that higher stock prices are still in the cards.
The following STX price chart illustrates the bullish trend that began in May 2016 and is still in force today.
Chart courtesy of StockCharts.com
This Seagate chart illustrates the bullish trend that has developed off the May 2016 lows. It carries the quintessential characteristic of a bullish trend, which contains higher highs and higher lows as the trend moves from the lower left to the upper right of the price chart.
This bullish trend is best defined using an ascending channel. This channel is created by using two parallel upward-sloping trend lines, where upper resistance is created by connecting the peaks on the price chart, and support is creating by connecting the toughs on the price chart. These two trend lines have effectively contained the price of Seagate stock as it has risen from a low of $17.57, to where it currently sits at $46.88.
The beauty of an ascending channel is that as long as price is contained within the channel, higher prices are expected to follow. In my January 2017 report, I outlined that STX stock was testing a significant support level that is defined using the ascending channel. I expressed my view based on the technical indicators that were present. I stated that there was nothing to suggest that a larger correction was set to ensue, and as long as the price of Seagate shares remained above this key level of resistance, the bullish trend towards higher prices was set to continue.
My bullish view was supported by an indicator that was generated in August 2016. This indicator was a golden cross, and it is produced when the 50-day moving average, highlighted in blue, crosses above the 200-day moving average, highlighted in red. This popular indicator is used to confirm that a bull market is in development.
The following Seagate stock chart illustrates further developments and technical indicators that serve to suggest that higher prices are still on the horizon.
Chart courtesy of StockCharts.com
The main focus on the chart above is the moving average convergence/divergence (MACD) indicator located in the lower panel. MACD is a simple yet effective trend-following momentum indicator that uses signal-line crossings to distinguish between bullish and bearish momentum.
In November 2016 and January 2017, a bullish cross was generated, which served to suggest that bullish momentum was propelling STX stock. As a result, the path of least resistance was geared towards higher prices. Under both circumstances, this indicator correctly suggested that the share price was set to advance.
The MACD indicator is currently converging and a bullish cross is days away from generating. Based on the previous indications, I can only assume that another advance will follow.
This bullish run just found support using the 50-day moving average. This moving average is created by averaging the closing price over the last 50 days. Using the 50-day moving average as a level of support serves to indicate that the trend towards higher prices is now accelerating.
Bottom Line on Seagate Stock
Seagate stock continues to adhere to the rules set out by technical analysis, and these technical indicators continue to suggest that higher STX stock price are on the horizon. I will continue to hold a bullish view on Seagate shares until there are indications on the price chart that suggest another view is warranted