Trade of the Day: Western Digital Corp (WDC) Flashes Head & Shoulders Breakout

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Western Digital Corp (NASDAQ:WDC) — This manufacturer and designer of hard disk drives for personal computing enhanced its global position with the recent acquisition of SanDisk.

Standard & Poor’s highlights the acquisition as an aid to stabilizing hard disk drive prices and margins, and it forecasts Microsoft Windows 10 as a support to PC demand. They forecast a sales rise of 30% in fiscal year 2017 (June) for WDC, which will benefit directly from the SanDisk acquisition.

Further they estimate FY 2017 earnings of $4.29, up from $1.06 in FY 2016, and $6.44 in FY 2018. These improvements are forecast due to the significant cost synergies from the SanDisk and Hitachi Global Storage Technologies businesses.

On September 9 Argus Research reiterated its “buy” rating on WDC with a target of $60 after WDC’s management increased its first-quarter EPS view to $1-$1.05 from earlier guidance of up to 90 cents.

In December 2014, WDC began a decline from its all-time high of over $114. However, with the announcements of acquisitions and resulting revised upward earnings, the stock bottomed in May at about $35, the low of which developed into a head-and-shoulders bottom formation. That significant bottom was confirmed by a high-volume break-away gap at $53 on September 7.

The break was also confirmed by my internal CBR system (Ultra-Buy), and a cross-over of the 200-day moving average by the 50-day moving average (Golden Cross). A buy signal from the MACD indicator was also triggered.

Traders and speculators should try to buy WDC under $55 with a trading target of $65. Longer-term speculators should benefit from its liberal $2 dividend which provides a yield of 3.6%.

WDC SHS Bottom T65
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Article printed from InvestorPlace Media, https://investorplace.com/2016/09/wdc-stock-western-digital-sandisk/.

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