Western Digital's 3.58% Drop Extends 2-Day Slide to 4.75% as Technical Indicators Signal Downtrend

Western Digital (WDC) has experienced a 3.58% decline in the most recent session, extending its two-day losing streak to a cumulative drop of 4.75%. This price action warrants a technical analysis to assess potential implications for the stock’s near-term trajectory.

Candlestick Theory

The recent bearish candles, particularly the October 10 session with a $115.03 low and $121.945 high, suggest a potential breakdown. The long bearish shadow on October 10 indicates rejection at higher levels, while the subsequent bearish close on October 9 reinforces downward momentum. Key support levels are likely at $115.03 (the October 10 low) and $105.42 (a prior trough on September 26). Resistance is temporarily at $121.945, but a failure to reclaim this level could signal further weakness.

Moving Average Theory

Short-term moving averages (e.g., 50-day) appear to have crossed below longer-term averages (e.g., 200-day), suggesting a bearish trend. The 50-day MA may currently sit below the 200-day MA, indicating a potential bearish crossover. This alignment reinforces the downtrend and implies continued selling pressure. However, the 100-day MA might offer a reference point for near-term consolidation.

MACD & KDJ Indicators

The MACD line has crossed below the signal line, signaling bearish momentum. The KDJ stochastic oscillator, while not in oversold territory, shows %K and %D lines trending lower, suggesting weakening bullish momentum. Divergence between MACD and KDJ is minimal, but the lack of an oversold condition (RSI at 39.18) reduces the likelihood of an immediate reversal.

Bollinger Bands

The price has approached the lower Bollinger Band, indicating low volatility and potential for a rebound. However, the bands remain relatively narrow, suggesting a possible expansion phase. If the price breaks above the lower band, it may signal a short-term bounce, but sustained volume would be needed to confirm this.

Volume-Price Relationship

Trading volume on October 10 was 7,046,192 shares, notably higher than the previous session’s 6,234,317. This increased volume during a price decline validates the bearish move. If volume continues to rise with further declines, it strengthens the downtrend. Conversely, declining volume could indicate waning bearish conviction.

Relative Strength Index (RSI)

The RSI at 39.18 remains in neutral territory, suggesting neither overbought nor oversold conditions. While the RSI has trended lower, it hasn’t triggered a buy signal (below 30). A divergence between RSI and price action (e.g., RSI rising while price falls) could hint at a potential reversal, but this requires further confirmation.

Fibonacci Retracement

Key Fibonacci levels for the recent $137.40–$115.42 range include 23.6% at $124.70, 38.2% at $121.94, and 50% at $126.20. If the price rebounds, these levels may act as resistance. A break below 23.6% could indicate a stronger downtrend, while a sustained close above 38.2% might suggest a short-term consolidation phase.

Backtest Hypothesis

The backtest strategy, which triggers buys when RSI falls below 30 and sells when it exceeds 70, underperformed the benchmark significantly from 2022 to 2025-10-10. The strategy returned 12.80% versus the benchmark’s 48.31%, with a negative excess return of -35.51% and a low Sharpe Ratio of 0.10. This highlights the strategy’s inefficiency in capturing market gains. The current RSI of 39.18 is neutral, precluding any immediate signal. However, the confluence of bearish MACD and weak volume suggests that even if the RSI approaches 30, a reversal may not materialize without additional confirmation from other indicators.