Western Digital (WDC) reached a settlement with activist investor Elliott Management earlier this month and the company said it would consider alternatives. A sell-side fundamental analyst lowered their price target Tuesday for the stock while keeping a "buy" rating, but maybe the charts have the direction right now. Let's check.
In the daily bar chart of WDC, below, we can see a longer-term decline over the past year. Downdrafts are frequent and have wiped out prior rebounds. WDC is retesting the March/April lows and we are not seeing clear signs that prices can rebound again. Prices are below the negatively sloped 50-day and 200-day moving averages.
The daily On-Balance-Volume (OBV) line shows weakness from early May. The 12-day price momentum study is not showing us a clear bullish divergence.
In the weekly Japanese candlestick chart of WDC, below, we see a mixed to negative picture. The two most recent weekly candles are long red (bearish) candles telling us that the bears are in control. Clear lower shadows are absent so we do not get signals that the lows are being rejected.
The OBV line has not made a lower low but it is pointed lower. The 12-week momentum study could eventually show us a bullish divergence but it is too soon to expect it.
In this daily Point and Figure chart of WDC, below, we can see a potential downside price target in the $36 area.
In this weekly Point and Figure chart of WDC, below, we see a $28 target.
Bottom-line strategy: WDC could stabilize in the $45 area but the risk is for further declines in the weeks ahead. Avoid the long side of WDC.
