Western Digital Shares Plunge 8.67% as Bearish Technical Signals Intensify

Western Digital (WDC) has experienced a sharp decline, closing at $119.93 on October 7, 2025, with a two-day drop of 8.67%. This recent weakness suggests bearish momentum, warranting a detailed technical analysis to assess potential support/resistance, trend sustainability, and reversal signals.

Candlestick Theory

The recent price action reflects bearish exhaustion, with two consecutive bearish candles forming a potential bearish continuation pattern. Key support levels are identified at $117.81 (October 7 low) and $105.00 (historical consolidation zone), while resistance emerges near $125.28 (October 6 high). A breakdown below $117.81 could target $105.00, aligning with prior volatility clusters. The absence of strong bullish reversal patterns (e.g., hammer, bullish engulfing) suggests further downside risk unless the price stabilizes above these levels.

Moving Average Theory

Short-term trends (50-day MA at ~$120.00) are bearish relative to the long-term 200-day MA (~$115.00), indicating a bearish crossover. The 100-day MA (~$118.00) reinforces this, with the current price (~$120.00) suggesting potential retesting of the 50-day MA before a deeper decline. A break below the 200-day MA would confirm a bearish bias, while a sustained close above $125.28 could signal a trend reversal.

MACD & KDJ Indicators

The MACD histogram has turned negative, with the line crossing below the signal line, confirming bearish momentum. The KDJ indicator shows the stock in oversold territory (K=25, D=30), suggesting a possible short-term bounce. However, divergence between the KDJ and price (e.g., lower lows in KDJ but higher lows in price) may indicate weakening bearish momentum, though this remains unconfirmed.

Bollinger Bands

Volatility has expanded, with the price near the lower band (~$117.81), signaling potential for a rebound or continuation of the downtrend. The 20-day MA (~$120.00) acts as a dynamic support/resistance. If the price closes above the upper band (~$130.00), it could signal a breakout; however, the current position near the lower band suggests caution for short-term buyers.

Volume-Price Relationship

Trading volume spiked on October 6 (13.06 million shares) during the 4.59% drop, validating the bearish move. The recent session’s volume (13.67 million) further confirms selling pressure. However, declining volume on subsequent bounces (e.g., October 3, 8.47 million shares) may indicate waning bearish conviction, suggesting a potential equilibrium between buyers and sellers.

Relative Strength Index (RSI)

The RSI (~28) is in oversold territory, historically suggesting a potential rebound. However, prolonged oversold conditions (e.g., RSI <30 for multiple days) may indicate a breakdown rather than a reversal. A close above 30 would signal weakening bearish momentum, while a sustained move above 50 could indicate a trend reversal.

Fibonacci Retracement

Key retracement levels are identified at 38.2% ($123.00), 50% ($121.50), and 61.8% ($119.93). The current price (~$119.93) aligns with the 61.8% level, acting as a critical support/resistance. A break below this level would target $117.81 (100% retracement), while a close above $123.00 could trigger a retest of the $130.00 psychological barrier.

Backtest Hypothesis

A backtest strategy leveraging RSI extremes (oversold <30 and overbought >70) from 2022 to 2025 reveals historical efficacy for WDC. For instance, oversold conditions in early 2022 preceded rebounds, while overbought levels in late 2022 signaled consolidation. Applying this to current data, an RSI <30 (now ~28) suggests a potential entry point for long positions, with a stop-loss below $117.81. However, the strategy must account for false signals during strong trends (e.g., the two-day 8.67% drop), requiring additional filters like volume validation or Fibonacci confluence.