Western Digital Stock Is All Set to Make a Substantial Move

Western Digital Stock
credits:istock.com/NAN104

WDC Stock: Awaiting Confirmatio

The stock market has been on such a steady move higher that, any time there is even the slightest move lower, anxiety begins to set in as investors ponder the thought that perhaps this is the beginning of the ever-elusive correction that has been absent from the market.

This may or not be the case, but I keep calm and collected in all market conditions by sticking to disciplined trading principles, which are supposed to void my emotions from investment decisions.

The reason why I am focusing on Western Digital Corp (NASDAQ: WDC) stock is that it is a prime example of how I apply disciplined trading principles to my investment strategies. These trading principles are technical in nature and, therefore, I take my cues from the price action and the indications that were generated on the Western digital stock chart.

I am using these principles to determine when WDC stock will be set up to make its next move. As a result, I am keenly watching the technical price pattern which is currently in development on the following Western Digital stock chart.

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Western Digital Stock Chart

Chart courtesy of StockCharts.com

The pattern highlighted on the preceding WDC stock chart is a descending channel. This pattern defines an orderly downtrend that contains a series of lower lows and lower highs.

The two parallel trend lines, which were created by connecting the series of lower highs and lower lows, represents respective levels of price support and price resistance.

In essence, as long as the Western Digital stock price is contained within the channel, lower prices will prevail over time. Only when resistance or support is broken will this notion no longer stand true.

I am inclined to believe that this descending channel will resolve itself in a bullish manner by breaking above resistance, which will imply that much higher prices are in development.

My inclination toward higher WDC stock prices is based on a confluence of indications that are currently highlighted on the following Western Digital stock chart.

Western Digital Stock

Chart courtesy of StockCharts.com

This WDC stock chart has been annotated in order to highlight constructive price action that consists of an impulse wave and a consolidation wave. These waves are the pillars that create and sustain a bullish trend, and the presence of these waves in their current form is in itself a good reason to carry an inclination toward higher prices.

The impulse wave, which is highlighted in green, defines the stage in a bullish trend when the stock prices staged a sustained move toward higher prices. This impulse wave began in May 2016, and made a remarkable move from $33.26 to $94.56, tacking on 184.3% in gains over a 15-month time frame.

The consolidation wave, which is highlighted in purple, defines the stage in a bullish trend when the stock refrains from advancing and it corrects. This wave serves to unwind any extreme conditions that were created by the impulse waves that precede it, which sets the stage so that another impulse wave can follow.

The consolidation wave highlighted on the Western Digital stock chart is the same descending channel that was highlighted earlier, and a break above resistance will suggest that another advancing impulse wave is set to follow.

Fortunately, a very influential momentum indicator known as the moving average convergence/divergence (MACD) is currently implying that such an outcome is very plausible. MACD is trend-following momentum indicator that distinguishes whether bullish or bearish momentum is influencing the trading action in a stock.

Bullish momentum implies that the path of least resistance is toward higher prices, while bearish momentum implies that the path of least resistance is toward lower prices. This notion is why this influential momentum indicator has a very good track record of correctly confirming whether an advancing impulse wave or a corrective consolidation wave is in development.

The impulse wave that began in May 2016 was being reinforced by a bullish MACD cross that was generated months before, in February 2016. A similar instance occurred in May 2017, when a bearish MACD cross was generated, and it was the precursor to the consolidation wave that began a few months later, and is currently in development.

I believe that the MACD indicator is a precursor of things to come, which is why I am very excited about the MACD cross that was just generated on the WDC stock chart. I believe it implies that an impulse wave is on the horizon, which will be confirmed only when the current consolidation wave is completed.

Analyst Take

I am inclined to believe that higher Western Digital stock prices are on the horizon. This inclination toward higher prices is being suggested by a number of indications on the WDC stock chart, which will only be confirmed once resistance outlined by the descending channel is broken.