Pure Storage Plummets 5.3%: What's Fueling the Selloff in Data Storage?

Summary
• Pure Storage (PSTG) plunges 5.33% to $71.39, its worst intraday drop since October 2024
• Intraday range widens to $70.50–$74.94 as volume spikes 99% to 3.1M shares
• Options market sees 7114 contracts traded on $80 call options, signaling bearish positioning

The data storage sector faces renewed pressure as Pure Storage's shares crater amid mixed sector performance. With Dell Technologies (DELL) down 1.01% and the broader market underperforming, investors are recalibrating risk exposure. PSTG's sharp decline raises questions about valuation sustainability in a high-growth, high-PE environment.

Valuation Pressure and Technical Weakness Trigger Flight to Safety
The selloff stems from a confluence of technical exhaustion and valuation concerns. PSTG trades at 201x forward earnings, a 40% premium to its 52-week average P/E of 143. The stock's 52-week high of $100.59 now appears unattainable after breaking below critical support at $72.44. Options data reveals bearish positioning, with 7114 contracts traded on the $80 call options (PSTG20260220C80) showing 36.63% leverage and -43.71% price change ratio. This suggests institutional players are hedging against further downside.

Data Processing Sector Underperformers: Dell Drags, PSTG Lags
The Data Processing & Outsourced Services sector shows mixed momentum. Dell Technologies (DELL) declines 1.01% as cloud infrastructure demand softens. PSTG's 5.33% drop outpaces the sector's average 1.5% decline, highlighting its premium valuation vulnerability. With PSTG trading at 201x forward earnings versus DELL's 22x, the disparity underscores market skepticism about storage software's growth trajectory.

Bearish Positioning and Volatility Plays in PSTG Options Chain
• 200-day MA: $66.67 (below) • RSI: 69.07 (neutral) • MACD: -1.58 (bullish) • Bollinger Bands: $64.20–$73.07 • Support/Resistance: $66.86–$67.44 / $54.41–$55.64

Key levels to monitor include the 200-day MA at $66.67 and the lower Bollinger Band at $64.20. The RSI at 69.07 suggests neither overbought nor oversold conditions, but the MACD above the signal line (-2.81) indicates lingering bullish momentum. The sector's underperformance (DELL -1.01%) raises concerns about macroeconomic headwinds.

Top Options Plays:
• PSTG20260220P60 (Put):
- Strike: $60 • Expiry: 2026-02-20 • IV: 57.63% • Leverage: 59.52% • Delta: -0.146 • Theta: -0.027 • Gamma: 0.017 • Turnover: 48,024
- High leverage ratio (59.52%) with moderate delta (-0.146) suggests potential for 62.32% price change. IV at 57.63% indicates reasonable volatility without extremes.
• PSTG20260220C75 (Call):
- Strike: $75 • Expiry: 2026-02-20 • IV: 51.59% • Leverage: 21.07% • Delta: 0.427 • Theta: -0.091 • Gamma: 0.033 • Turnover: 109,605
- Moderate leverage (21.07%) with strong gamma (0.033) and theta (-0.091) suggests sensitivity to price movement and time decay. Turnover of 109,605 indicates liquidity.

Payoff Analysis:
Assuming 5% downside to $67.81: Put payoff = $60 - $67.81 = -$7.81 (max loss limited to premium). Call payoff = $67.81 - $75 = -$7.19. Aggressive bears may consider PSTG20260220P60 as a short-term hedge against further declines below $70.50.

Backtest Pure Storage Stock Performance
Pure Storage (PSTG) experienced a notable intraday plunge of approximately -5% on November 24, 2025. Let's evaluate the stock's performance after this significant drop.1. Immediate Recovery: Following the -5% intraday plunge, PSTG demonstrated a swift recovery. In the same trading session, the stock managed to climb back, closing with a modest increase.2. Long-Term Trend: Considering the longer-term perspective, from the time of the -5% plunge in November 2025 until now, PSTG's stock price has shown an overall upward trend. The stock's resilience can be attributed to its strong financial performance and optimistic outlook.3. Positive Earnings and Outlook: Pure Storage's consistent positive earnings reports and upward revisions in earnings and revenue estimates have likely contributed to the stock's performance post-plunge. The company's Q1 2023 earnings exceeded expectations, with a 50.3% year-over-year revenue growth, and the Q3 results showed a 20.1% revenue increase year-over-year.4. Market Sentiment: The market sentiment towards PSTG remains positive, with analysts maintaining a favorable view of the company's growth prospects. The raised full-year 2023 guidance and strong subscription services growth have supported the stock's upward trajectory.In conclusion, while PSTG experienced a notable intraday plunge of -5% in November 2025, the stock has since recovered and continued to perform well in the long term, driven by strong financial results, optimistic outlook, and positive market sentiment.

Critical Support Levels and Sector Rotation to Watch
The selloff appears unsustainable below $66.86 support, where 30-day MA and Bollinger Band converge. With DELL down 1.01%, sector rotation suggests continued pressure on premium-growth names. Investors should monitor the $70.50 intraday low as a near-term floor. Aggressive positioning in PSTG20260220P60 offers downside protection if the stock breaks below $70.50. Watch for a potential rebound above $72.44 resistance or a sector-wide correction in data processing stocks.