In a recent update on Western Digital (WDC) , we acknowledged that WDC was in an uptrend but believed that further gains would be hard, concluding, "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."
Despite what I saw in the tea leaves, WDC came out with better-than-expected earnings and prices gaped higher. I got flak from some Real Money readers who did not argue with me about the charts but touted the bullish fundamental story and implied I did not know what I was writing about -- sorry, apples and oranges. Happy to entertain a different view of the charts but don't quote the fundamentals to me -- that's not my stick. So back to the charts.
In this updated daily bar chart of WDC, above, we can see that prices are above the rising 50-day moving average line. WDC is above the rising 200-day line, maybe too far above it. The On-Balance-Volume (OBV) line has moved up with prices since May and supports and confirms the advance but the line has turned flat in the past two weeks. Price momentum is not diverging from the price action.
In this short-term daily candlestick chart of WDC, above, you can see the recent window or gap. Prices have stayed in a narrow range with small spinning tops or doji patterns. Jan. 26 has been the "high day" and a close below the low of the 26th will be a short-term sell signal. A close below $78 will weaken the picture and could precipitate a pullback to the $75-$74 area.