Seagate Technology PLC: These 3 Charts Show Where STX Stock Could Go Next
STX Stock: Did Shares Bottom in May?
Seagate Technology PLC (NASDAQ:STX) stock is another example of a company that has been punished by a bear raid. STX stock has fallen from a peak of $63.03 to a trough of $18.42, equating to a loss of 70%. If you happened to buy at the top and are currently holding STX shares, I can guarantee that you lack a trading strategy.
I approach each and every investment in the same manner. This keeps my investment decisions objective and simple. I will take you through my approach as I examine the STX stock chart. We will look at the current trend from a couple different perspectives and outline any signals that provide pertinent information.
The following chart illustrates one signal that warned investors of an upcoming decline in STX stock:
Chart courtesy of www.StockCharts.com
Last year, STX stock confirmed a death cross, which is a bearish signal. A death cross appears on the chart when a faster moving average (for example, the 50-day moving average) crosses below a slower moving average (e.g., 200-day moving average). Traders use this signal to confirm a bear market is on the horizon.
Using any signal on its own is never a good trading strategy. As a rule of thumb, I never trade against a signal after it has been generated. Once the death cross was confirmed, all new positions in STX stock should have been a move either to the sidelines or short. This strategy would have avoided many losses and potentially produced some profits. The death cross is not perfect, but it serves to prove that there is little reason to be long in the face of such a signal.
The following chart illustrates the importance of the low generated in 2016:
Chart courtesy of www.StockCharts.com
STX stock had been trading below $20.00 since shares first went public in 2002. On four different occasions, the company’s share price tried to breach $20.00, but the bears were quick to turn the bulls away. This level of resistance stood for nine years before it was finally broken.
When resistance finally breaks, it becomes an area of support. It is not uncommon for shares to trade back to his level and retest it. A strategy would be to buy shares as they test this support line. Placing a stop loss below the February 2016 low would be a way to keep your losses tight as you try to acquire shares on the cheap.
The following chart illustrates the downtrend line:
Chart courtesy of www.StockCharts.com
A downtrend has dominated STX stock since December 2014. The downtrend line highlighted in blue is created by connecting the peaks. This line must be broken to the upside for the bulls to gain the upper hand. If STX stock can surpass this trend line it will confirm that the downtrend in STX stock has ended and that a new bull market has begun.
Breaking above that trend line will not be an easy task. It may take several attempts to do so. When it does finally break, we will have one more piece of the puzzle pointing to a bullish trend reversal. The line currently stands at approximately $35.00.
The Bottom Line on STX Stock
The downtrend that has defined STX stock shares remains intact. The share price was just rejected by the downtrend line. STX stock would need to break above that trend line and generate a golden cross to confirm a trend reversal. If shares were to revisit the May lows near $20.00, I would use that as an opportunity to acquire shares at a major level of support. Taking risk into account, I would place a stop loss slightly below the May 2016 lows.
(Note: The above outlined strategy should not be construed as a buy recommendation for STX stock. Rather, it is meant to serve as an example of the kind of strategy investors can employ for new trades.)
