WDC Stock: Simply Bullish
Western Digital Corp (NASDAQ:WDC) develops and produces data storage devices in an era in which the amount of data we consume and store continues to grow at exponential rates. Data transfer speeds have allowed huge amounts of data to stream live on our platforms, and all this information needs to be stored and housed somewhere.
The demand for larger data storage devices grows as consumers of data try to keep pace. WDC stock is well positioned to benefit from this insatiable demand.
Western Digital stock suffered quite a setback in 2015, as the share price fell from a high of $107.91 to a low of $34.30. This was a devastating loss for WDC stock investors, but my argument is that this drop was in the context of a much larger bull market, and that this price action was necessary in order for WDC stock to set the stage for its next advance.
I use price charts to analyze potential investments, and this process has been instrumental in setting objectives and producing appropriate strategies. It is because of this body of knowledge that I am bullish on WDC stock, and the evidence I provide below supports this view.
The following chart illustrates the major level of support in Western Digital stock.
Chart courtesy of StockCharts.com
The WDC stock chart illustrates that $40.00 is a major level of price support. Prior to being a level of support, $40.00 acted as a level of resistance. This price level stood for four years, and was finally broken after four failed attempts.
Once this level was broken, Western Digital stock ran to $107.91, which represented an incredible 170% return over a two-year time span. It was unfortunate that this entire run higher was completely unwound in the following year.
The sell-off was halted dead in its tracks when the price once again revisited the major level of resistance, which has now become support. It is not uncommon for a stock to trade back and test a level that had previously acted as support or resistance.
A savvy investor could have anticipated support at $40.00 and welcomed sellers at that level.
The indicator in the lower panel of the above chart is known as moving average convergence/divergence (MACD). The MACD is a simple and effective trend-following momentum indicator. Signal-line crossings are used to distinguish between bullish and bearish signals. This signal is now converging, and a bullish signal is only months away. This indicator would confirm that a longer-term bull market has initiated.
The following Western Digital stock illustrates the short-term price action that supports a bullish bias.
Chart courtesy of StockCharts.com
The ascending channel is the road map that bulls seek. This pattern has two parallel lines that define this trend. The share price will oscillate between these two lines for as long as the trend permits.
Swing traders could use this pattern to set up an appropriate trading strategy. I would only take long positions in such a trend, because a bad entry point will eventually be corrected by time because the pattern slopes upward. This bullish trend would end when the channel is broken to the downside.
A golden cross is a bullish signal that is produced when a faster 50-day moving average (highlighted in blue) crosses above a slower 200-day moving average (highlighted in red). This signal was generated in September 2016, and it confirms that a bull market is now officially in play. It is not a coincidence that the trend higher accelerated after this signal was produced.
The bulls are now fully in control of Western Digital Stock.
The Bottom Line on Western Digital Stock
I am bullish on Western Digital stock and believe that a new bull market has only begun. My view on WDC stock is strictly based on the technical indicators that were generated from the price chart and, if these signals change, so too will my view.