We reviewed Western Digital Corp. (WDC) two weeks ago, and we were impressed how it was acting, "The broad market averages are weaker today (11/14) but WDC is showing independent strength this morning. I would reiterate the strategy of going long WDC on strength above $91 and $95."
With the benefit of hindsight we can see that WDC closed above $91 and gaped lower the other day. Prices held the rising 200-day moving average line the past two days and this looks like another low-risk (if that's possible) buying opportunity. Another review of the chart and indicators seems in order now.
In this daily bar chart of WDC, above, we can see that prices are still making higher lows from August to October and this month. Prices are just below the flat 50-day moving average line and still above the rising 200-day line. The gap lower on Monday has not produced a decline like the gap down did in late July and I would suggest that some traders may have used the decline to buy.
The On-Balance-Volume (OBV) line only shows minor weakness and the trend-following Moving Average Convergence Divergence (MACD) oscillator shows a small crossover to the downside from above the zero line. On balance, the daily chart is not bullish and not bearish.
In this weekly bar chart of WDC, above, we can see that prices are testing the rising 40-week moving average line as they have been doing the past three months. The weekly OBV line is still in a seven-month sideways pattern suggesting that neither buyers nor sellers are acting aggressively.
The weekly MACD oscillator is trying to turn up for a fresh outright go long signal.
In this Point and Figure chart of WDC, above, we can see a column of "O's" to the downside. Gaps are not shown with this charting method. A decline to $84 would break the pattern of higher lows and a trade up to $94 would be a fresh upside breakout.
Bottom line: WDC has arrived at the moment of truth, so to speak. Prices are trading softer Wednesday morning and we will see if the 200-day moving average line will again act as support. The risk becomes clear -- two consecutive closes below the 200-day average line would tell me to reduce my long exposure.