Western Digital (WDC) peaked in late 2014 and spent the next year plus in a hard decline to $35 from around $115 -- quite an adjustment. The technical landscape has improved since January, and today's strength leads me to believe we have a lot more on the upside.
Time to re-examine the daily and weekly charts and indicators.
In this daily chart of WDC, above, we can see the bottom processing unfold. There is a selloff in January and a lower low in February. Notice how the On-Balance-Volume (OBV) line does not make a lower low in February -- a subtle sign that investors bought that weakness. Prices ultimately made a slight new low in May, but on that decline the Moving Average Convergence Divergence (MACD) oscillator made a higher low and the OBV line retested the January low. From May to date things begin to pick up steam. The slope of the 50-day moving average line turns positive. We get a bullish golden cross of the 50-day and 200-day averages in early September. A pattern of higher lows and higher highs can been seen from the May nadir. The pullback on WDC earlier this month stopped at the rising 50-day moving average line.
In this longer-term weekly chart of WDC, above, we can see that prices are now above the flat-to-rising 40-week moving average line. The weekly OBV line has moved to the upside and the MACD oscillator went to an outright go-long signal late last month. Notice how WDC held the $75 level on the way down? This is support and it will probably act as resistance on the way back up. Still, a rally from $60 to $75 is pretty good work if you can get it. It will take a decline back below $50 to make me question the base pattern.
