Western Digital Corporation, together with its subsidiaries, engages in the development, manufacture, sale, and provision of data storage solutions that enable consumers, businesses, governments, and other organizations to create, manage, experience, and preserve digital content worldwide. The company’s product portfolio includes hard disk drives, solid-state drives , direct attached storage solutions, personal cloud network attached storage solutions, and public and private cloud data center storage solutions.
Take a look at the 1-year chart of Western (NASDAQ: WDC) below with my added notations:
WDC has been in a solid downtrend for the past year. However, during the most recent 3 months, the stock has formed an inverse head and shoulders reversal pattern (green). I have noted the head (H) and the shoulders (s) to make the pattern more visible. The stock’s neckline resistance was at the $50 level (red). WDC confirmed its H&S yesterday when it broke through the neckline.
Keep in mind that simple is usually better. Had the inverse H&S pattern never been pointed out, one would still think WDC was moving higher simply because it broke through the $50 resistance level.
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The Tale of the Tape: WDC confirmed an inverse head & shoulders pattern. A long trade could be entered near the $50 level, with a stopped placed beneath it.
Before making any trading decision, decide which side of the trade you believe gives you the highest probability of success. Do you prefer the short side of the market, long side, or do you want to be in the market at all? If you haven’t thought about it, review the overall indices themselves. For example, take a look at the S&P 500. Is it trending higher or lower? Has it recently broken through a key resistance or support level? Making these decisions ahead of time will help you decide which side of the trade you believe gives you the best opportunities.
No matter what your strategy or when you decide to enter, always remember to use protective stops and you’ll be around for the next trade. Capital preservation is always key!
Christian Tharp, CMT
Follow me on Twitter: @cmtstockcoach