Seagate Technology plc (STX) survived a deep correction last month but it held the rising 50-day moving average line and is now in position for further gains. In January we reviewed the charts of STX, writing, "Longs have a tiger by the tail. Raise sell stop protection to a close below $47. Some sideways price action would be welcomed and might be used to buy more STX, unless you are already over weighted. My new price targets are the $60-$65 area followed by $73."
In hindsight STX declined to $46 but did not close below $47. If you used a straight stop below $47 would have been stopped out. Let's pay a visit to the charts to see what we might expect the next few weeks.
In this updated daily bar chart of STX, below, we can see the quick decline in early February that ended with a test of the rising 50-day moving average line. Prices are above both the 50-day and the 200-day lines. The daily On-Balance-Volume (OBV) line has been rising since late July and its recent new high confirms the bull move in STX. A rising OBV line tells us that the buyers of STX have been more aggressive. The trend-following Moving Average Convergence Divergence (MACD) oscillator just turned up for a fresh outright go long signal.
In this weekly bar chart of STX, below, we can see that prices are above the rising 40-week moving average line. A price gap remains on this chart and reminds us of the strong shift in demand. The weekly OBV line has been rising strongly the past two years and tells us that buyers have dominated. The weekly MACD oscillator is also very bullish.
In this Point and Figure chart of STX, below, we can see the $73 price target we noted in our January review. A trade at $57 will be a fresh breakout.
Bottom line: If stopped out or not long STX I would look to go long on strength above $57 risking below $48 now. Look for gains to our $73 price target.
Read Real Money contributor Stephen "Sarge" Guilfoyle's take on STX and other dividend plays in his Market Recon column here.