For his first Executive Decision segment of "Mad Money" Wednesday, Jim Cramer spoke with David Goeckeler, CEO of Western Digital Corp. (WDC) , the maker of data storage devices that has seen its shares soar 50% from their March lows. The shares currently yield 4.8%.
Goeckeler said Western Digital produces one of the raw materials that makes the digital economy possible, which is why it has been deemed an essential business in many of the countries where it operates. Its business continues to be strong and according to plan, he said.
Goeckeler noted that all of Western Digital's Chinese factories have reopened and retail demand has increased as China begins to recover. Western Digital is practicing social distancing in its factories and any employee who can work from home is working from home.
The fundamental story sounds positive, so let's check out the charts of WDC from a safe distance.
In this daily Japanese candlestick chart of WDC, below, we can see that the recent price decline broke the lows of November/December and June. The damage looks significant, but let's check closer.
Prices are below the declining 50-day moving average line and the bearish 200-day moving average line. We could see the 50-day line move below the 200-day line soon. The trading volume, however, has not been much heavier than average in recent weeks. WDC went down, but it looks like investors did not rapidly head for the doors.
The daily On-Balance-Volume (OBV) line shows only a slight decline from the middle of February and the line has started to turn upward again. This does not look like a stock that has been taken out to the woodshed. The Moving Average Convergence Divergence (MACD) oscillator has already crossed to the upside for a cover shorts buy signal.
In this weekly bar chart of WDC, below, we can see that prices broke below the lows of early 2019 and late 2018 but they have quickly rebounded. We can see some bullish divergences. Prices made a new low for the move down but the OBV line did not. Also, the MACD oscillator is well above its corresponding low. These divergences make me optimistic about the second half of 2020.
In this Point and Figure chart of WDC, below, we used daily price data. The software is projecting a potential upside price target of around $80.
Bottom line strategy: Aggressive traders could go long WDC on any dip into the $40-$35 area. Risk below $30 for now and look for $80 in second-half 2020.