Western Digital Is Nearing A Significant Break-Out

Jan. 03, 2020 11:51 AM ETWestern Digital Corporation (WDC)16 Comments


  • Western Digital is nearing a technical break-out which could send shares higher.
  • Option betting also suggests the stock may continue to rally.
  • The pricing environment for NAND memory appears to be improving.
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Western Digital (NASDAQ:WDC) may be ready for a significant technical break-out. It could result in the shares climbing by almost 18%. Options betting is suggesting that traders see the shares rising sharply by the middle of March. There may be some fundamental reasons for this improving outlook, with signs of improving pricing for NAND flash memory.

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NAND Price Recovery

There have recently been two articles written in Digitimes which suggest that the pricing for NAND memory will improve in 2020. One report was written on December 19, noting that the NAND flash contract prices may rise by up to 15% in the first quarter of 2020. Another article was written on January 2, suggesting that contract prices could increase by up to 40% this year.

Traders' Bet The Stock Rises

Higher prices could certainly help Western Digital, and it could be one reason why some traders are betting the recent equity rally continues. The $75 call options saw their open interest levels for expiration on March 20 rise by around 9,000 contracts on January 3. According to the data from Trade Alert, the calls traded on the Ask, and indicate that the options were bought, and are betting that Western Digital's stock will rise. The options traded for roughly $1.50 per contract, and that means the stock would need to rise to $76.50 or higher for the trader to earn a profit.

Technical Break-Out Approaches

The chart shows that the stock is nearing a big break-out should it rise above resistance in the $65.75 to $66 range. If that happens, the stock may rise to the next level of resistance at approximately $75.65. The stock appears to have formed a double bottom in December 2018 and June 2019, a

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This article was written by

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Designed for investors looking to stay ahead of the pack.

I am Michael Kramer, the founder of Mott Capital Management and creator of Reading The Markets, an SA Marketplace service. I focus on long-only macro themes and trends, look for long-term thematic growth investments, and use options data to find unusual activity.

I use my over 25 years of experience as a buy-side trader, analyst, and portfolio manager, to explain the twists and turns of the stock market and where it may be heading next. Additionally, I use data from top vendors to formulate my analysis, including sell-side analyst estimates and research, newsfeeds, in-depth options data, and gamma levels. 

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: Mott Capital Management, LLC is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Past performance is not indicative of future results.

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