We talked about Action Alerts PLUS holding Western Digital (WDC) a month ago and concluded: "The share price of WDC has weakened and could edge lower toward the $70 area. Prices have not made a top formation, so there does not seem to me to be a technical reason to look for a significant decline. However, it may take a number of weeks for price to stabilize and try the upside again."
In the past four weeks, we have seen WDC dip toward $70 and today it has gapped to the upside. Let's check the latest charts and indicators.
In this updated daily chart of WDC, above, we can see the uptrend from the May low. Prices are back above the rising 50-day and 200-day moving average lines. There is a bullish golden cross in early September as the 50-day average crossed above the 200-day average. The On-Balance-Volume (OBV) line was in an uptrend from the May low and has been in a sideways trend the past two months. With a strong up day under way today, it would not surprise me if the OBV line resumes its advance and confirms the price strength we are seeing again. The MACD oscillator looks like it is turning up again at the zero line.
In this weekly chart of WDC, above, we can see prices are above the rising 40-week moving average line. The weekly OBV line is positive overall but like the daily chart shows a pause in the uptrend. The weekly MACD oscillator looks like it was poised for a crossover but today's rally suggests that this indicator will turn upward again.
In this Point and Figure chart, above, we can see the most recent consolidation and the rally. A trade at $82 will be a new high and a breakout on this kind of chart. A breakout allows for a "count" to the $99 area.
Bottom line: WDC is off to a strong start this morning. A trade at $82 for WDC will be bullish and open the way to further gains. Today's gap is likely not to be filled, so traders looking to get long or increase longs on WDC should buy it around $80, but they will need to have a stop-loss at $74 for now.