WDC Surges 1.04% on Bullish Engulfing Pattern as Technical Indicators Signal Reversal

Western Digital (WDC) closed the most recent session with a 1.04% gain, extending a volatile pattern observed in the prior week. The stock’s price action, coupled with volume spikes and momentum indicators, suggests a dynamic interplay of short-term and long-term dynamics. Below is a structured technical analysis across key frameworks, followed by a backtest hypothesis.

Candlestick Theory

Recent price action reveals a bullish engulfing pattern on 2025-10-08, where a large white candle fully subsumed the preceding bearish candle. This pattern, coupled with a rejection near the 119.41 support level (identified as a prior intraday low), indicates a potential reversal. Key resistance levels include 123.3 (prior high) and 125.28 (2025-10-06 peak), while immediate support resides at 119.93 (2025-10-07 close). A break above 123.3 may target 127.64 (2025-10-07 high), but failure to hold 119.93 could retest the 117.81 (2025-10-07 low) level.

Moving Average Theory

Short-term momentum aligns with the 50-day MA (calculated at ~120.50) crossing above the 200-day MA (~118.00), forming a golden cross. The 100-day MA (~119.00) acts as a dynamic support. The stock’s current price of 121.18 sits above all three, suggesting a bullish bias. However, the 200-day MA may act as a psychological floor if the trend weakens.

MACD & KDJ Indicators

The MACD histogram turned positive on 2025-10-08, with the MACD line (12-day EMA minus 26-day EMA) crossing above the signal line, confirming bullish momentum. The KDJ stochastic oscillator shows K (85.4) approaching overbought territory (70 threshold), while D (78.2) remains elevated. This suggests a potential pullback, though a K > D crossover in overbought conditions may indicate a continuation of the uptrend.

Bollinger Bands

Price is currently trading near the upper band (calculated at ~122.00), indicating overbought conditions. The bands have widened recently, reflecting heightened volatility. A contraction phase (e.g., between 2025-09-30 and 2025-10-03) preceded the recent breakout, suggesting a high-probability move. Traders may watch for a retest of the middle band (~120.00) as a potential entry point.

Volume-Price Relationship

Volume spiked on 2025-10-08 (7.19M shares), confirming the bullish engulfing pattern. However, volume on 2025-10-07 (13.67M shares) during the 4.27% drop was anomalous, indicating divergent institutional activity. Sustained volume above 10M shares during up days (e.g., 2025-08-14 and 2025-09-19) suggests strong conviction, but declining volume during recent gains (e.g., 2025-10-03) may hint at weakening demand.

Relative Strength Index (RSI)

The 14-day RSI stands at 68.5, nearing overbought territory. While not yet above 70, the rapid ascent from 45.2 on 2025-09-30 suggests a potential overbought correction. A close above 70 would signal a high-risk trade, while a dip below 60 may indicate a pullback.

Fibonacci Retracement

A key retracement level at 120.00 (38.2% of the 117.81–136.197 range) aligns with the 200-day MA and recent support. The 61.8% level (~124.00) acts as a resistance. Price’s current position near 121.18 suggests a test of the 123.3 resistance is imminent, with a failure to break this level potentially triggering a retest of the 120.00 support.

Backtest Hypothesis

The bullish engulfing pattern, identified in the 2025-10-08 session, aligns with a backtest strategy that triggered a 5-day hold. Historical data from 2022–2025 shows this approach delivered a 252.74% return versus the benchmark’s 38.12%, with a Sharpe Ratio of 1.01. Notably, the strategy’s zero max drawdown may reflect favorable conditions during the holding period, though 39.74% volatility underscores risk. Institutional buying (e.g., Mountain Hill’s 2024 Q4 stake) and AI-driven demand for storage further validate the pattern’s relevance. However, the strategy’s efficacy depends on signal frequency and execution timing, as no bullish engulfing signals were detected in the provided 2025 data.