Seagate Technology PLC: The Bullish Trend in STX Stock Has Only Begun
STX stock: Riding the Bull
Seagate Technology PLC (NASDAQ:STX) stock represents a company that designs and develops storage devices and solutions for the enterprise and consumer clientele. They help create the infrastructure that is known to power the cloud. The cloud allows users to process and access data from third-party data centers.
The cloud has created a paradigm shift in computing, as mobile devices are the new norm and desktop computing is slowly becoming obsolete. Data is being accessed from third-party storage providers and the workplace is transforming to use mobile platforms as a result. Seagate stock stands to benefit as data usage is increasing at an exponential rate and, thus, demand for storage is increasing at the same pace. The trend has not directly transferred to STX stock, as performance has suffered in recent years as shares peaked in late 2014, but developments in price charts have left me optimistic about the prospective future.
The following chart illustrates the significance of the lows in STX stock that were set in 2016.
Chart courtesy of StockCharts.com
The main sticking point on the chart above is the line marked “Horizontal Support.” This line was not always support; prior to 2012, this line acted as resistance. It took multiple attempts over many years to break through this level.
When resistance finally breaks and it becomes an area of support, it is not uncommon for shares to trade back to this level and retest it. It is not a coincidence that the recent drop in share price halted at this exact level. As a matter of fact, savvy traders would have anticipated this level of support, and could have used this opportunity to acquire STX stock on the cheap.
The following chart illustrates bullish developments in Seagate stock.
Chart courtesy of StockCharts.com
The downtrend that has developed is as clear as day, and is defined by the trend line (highlighted in blue). This line is created by connecting the peaks on a price chart. A downtrend is defined by lower lows, confirmed by lower highs. It can easily be identified as the price moves from the upper left to the lower right. This is a clear example of bearish price action. Shares will continue to trade with a bearish bias for as long as the trend remains intact.
The good new is that STX stock managed to finally break above this aforementioned trend line. This event marks a trend reversal and suggests an end to the downward price pressure.
The break of the downtrend is not the only piece of bullish news that surrounds this stock. The following Seagate stock chart illustrates other positive developments that reaffirm the trend break.
Chart courtesy of StockCharts.com
The price action off the lows at $20.00 is very healthy, as impulse waves (highlighted in green) are followed by consolidation waves (highlighted in purple). Bullish charts are loaded with this type of price action. These patterns serve two purposes: defining upside price targets, and managing risk.
The bullish premise is reinforced by the golden cross, which is a bullish signal that is produced when a 50-day moving average, highlighted in blue, crosses above a 200-day moving average, highlighted in red. Traders use this signal to confirm that a bull market is on the horizon. It is always wise to trade in the direction of this signal. This signal warrants either long or neutral positioning.
The horizontal resistance line is the next obstacle that stands in the way of higher prices for STX stock. This level has managed to turn the bull away on more than one occasion. A break of this level would open the door to much higher prices in the mid-$40.00’s.
The Bottom Line on STX Stock
It is my opinion that Seagate stock has put in a bottom, and that premise is supported by a confluence of indicators. A break of the horizontal support will act as a catalyst to further fuel the price of STX stock higher. My bias is bullish, and will remain that way until the charts give me reason otherwise.
