Western Digital (WDC) continues to s-l-o-w. The candlestick charts are lighting the way.
Last week we suggested the rally in WDC would lose momentum, and today we want to emphasize the point.
In this updated daily bar chart of WDC, above, we can see prices had not made a new high since Wednesday and could close today below Wednesday's low. This would be a short-term sell signal known as a "close below the low of the high day." I learned this technique in the mid-1980s on a fixed-income hedging desk. The desk took the approach of being an active hedger and this technical signal to mark a short-term high was a good way to put on a hedge against a long position in mortgages or Treasuries. If prices held at a support zone, the hedge was often removed or covered. WDC is close to giving this signal. Combing this signal with a picture of slowing momentum from December into January (lower panel), I continue to anticipate sideways to lower price action.
In this three-month daily candlestick chart of WDC, above, we can see a possible bearish engulfing pattern with Friday's candle and today's candle. This potential reversal pattern can signal either sideways price action or price weakness.
Bottom line: On Thursday, we concluded by saying, "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." Today, with some bearish short-term signals, we want to suggest that profitable longs should consider raising their sell stops to lock in further profits.