The rally in Western Digital (WDC) , is likely to slow in the weeks ahead. WDC has doubled since the low made in May, but this rapid pace is probably going to slow as momentum has weakened and overhead resistance looms. This analysis is not different from our observations back on Dec. 3 when we said, "I would trade WDC from the long side, risking below $60 even though gains may be slow going in the weeks ahead."
In this one-year daily bar chart of WDC, below, we can see that prices have traded higher in a channel from the May low. We can see a bullish golden cross of the 50-day and 200-day moving averages in early September. Prices are above the rising 50-day average line and above (maybe too far above) the rising 200-day moving average line.
The On-Balance-Volume line, above, has moved up steadily the past year and tells us that buyers of WDC are willing to trade more shares of WDC, even when it is higher on the day. Traders often like to buy on weakness, but buying on strength is a sign of more aggressive buying. In the lower panel is the 12-day momentum study, which shows a bearish divergence from December into January. As prices made higher highs, the momentum indicator made lower highs showing us that the pace of the advance was slowing.
In this three-year weekly chart of WDC, above, there is a big decline for WDC from late 2014 and into early 2016. Prices temporarily halted their decline in the $75-to-$90 area before declining as low as $35. Prices rebased in 2016 and started a new uptrend. Prices are now above the rising 40-week moving average line. The weekly OBV line made two lows in the first part of 2016 and since August has risen steadily suggesting strong buying. In the bottom panel is the 12-week momentum indicator. This technical study shows increasing momentum readings until the current week, which shows a slowing from the prior week.
Bottom line: With overhead resistance from 2015 and slowing daily and weekly momentum figures I would anticipate that further near-term gains in WDC are going to be hard to achieve.