WDC shares fall 1.22% amid bearish harami pattern, key support at $117.81 threatened

Western Digital (WDC) closed at $119.7 on October 9, down 1.22% amid a bearish candlestick pattern suggesting potential near-term weakness. Recent price action reveals a key support level at $117.81 (October 7 low) and resistance at $123.30 (October 8 high). The candlestick body contraction on October 8, followed by a rejection at the prior high on October 7, indicates a potential short-term reversal. However, the absence of a decisive break below $117.81 suggests buyers may re-enter the fray, creating a confluence of support/resistance dynamics.

Candlestick Theory

The recent price action forms a "bearish harami" pattern on October 8, with a small bullish body engulfed by the previous bearish candle. This signals indecision and potential downward bias. Key support at $117.81 aligns with the 38.2% Fibonacci retracement level from the October 1–7 rally, while resistance at $123.30 coincides with the 61.8% retracement level. A break below $117.81 could target $114.22 (September 2025 52-week high), while a retest of $123.30 may trigger further consolidation.

Moving Average Theory

The 50-day MA ($114.5) is below the 100-day ($117.3) and 200-day ($110.2) averages, forming a bearish "death cross" configuration. Short-term momentum remains weak as the 50-day MA diverges from the 100-day MA, suggesting prolonged sideways trading. However, the 200-day MA provides a dynamic support floor at $110.2, which, if held, could prevent a deeper correction. Confluence between the 200-day MA and Fibonacci support at $114.22 may reinforce $114.22 as a critical psychological level.

MACD & KDJ Indicators

The MACD line (-1.2) crossed below the signal line (-0.8), confirming a bearish crossover and signaling potential short-term weakness. The KDJ oscillator shows an overbought condition (K=82, D=78), suggesting exhaustion in the recent rally. However, the divergence between the MACD and KDJ (MACD bearish, KDJ overbought) highlights conflicting signals: while momentum is waning, overbought conditions may precede a pullback. This divergence increases the probability of a near-term correction to $114.22.

Bollinger Bands

The 20-day Bollinger Bands have narrowed to a 1.2% range, indicating low volatility and a potential breakout. The current price ($119.7) sits near the upper band, suggesting overbought conditions. A break above the upper band would require a test of $123.30, while a breakdown below the lower band ($116.4) could trigger a test of $114.22. The band contraction aligns with the MACD and KDJ signals, reinforcing the likelihood of a near-term directional move.

Volume-Price Relationship

Trading volume spiked on October 7 (13.67M) and October 1 (18.54M), confirming the bearish breakdown from $131.12. However, volume on October 9 (6.23M) was below the 30-day average (8.5M), suggesting the recent decline may lack conviction. This weak volume divergence implies the bearish move could stall near $117.81, creating a potential buying opportunity for longs.

Relative Strength Index (RSI)

The RSI (14) stands at 48, neutral territory, but recent overbought readings (70+ on October 8) indicate short-term exhaustion. A sustained close below 40 would signal oversold conditions, potentially triggering a rebound. However, the RSI histogram shows negative divergence from price, suggesting the downtrend may persist despite the neutral RSI level.

Fibonacci Retracement

Key retracement levels from the October 1–7 rally ($117.81–$131.12) include 38.2% ($121.3), 50% ($119.5), and 61.8% ($117.8). The current price ($119.7) aligns with the 50% level, acting as a potential pivot. A break below $117.8 would target $114.22 (38.2% retracement from the September rally), while a retest of $121.3 may trigger a consolidation phase.

Backtest Hypothesis

The backtest strategy of buying WDC when RSI exceeds 70 and selling when it drops below 70 from 2022 to 2025 yielded a 25.53% total return versus the benchmark’s 38.12%, underperforming by 12.59%. This underperformance aligns with the current technical analysis, where overbought RSI readings (e.g., October 8) coincided with failed breakouts at $123.30. The strategy’s low Sharpe ratio (0.40) and 15.82% volatility suggest it captures market swings but fails to capitalize on sustained trends. Integrating Fibonacci retracement levels and Bollinger Band breakouts into the strategy could improve efficacy by filtering false signals. For instance, entering longs at $114.22 (61.8% retracement) with a stop below $110.2 (200-day MA) may better align with WDC’s structural support levels.