Western Digital Surges 22.81% on Institutional Buy-In as Bullish Momentum Gains Steam

Western Digital (WDC) has experienced a 4-day rally with a 22.81% cumulative gain, closing at $131.26 on October 2, 2025. This sharp move reflects strong institutional participation and a shift in short-term sentiment. The price action suggests a potential continuation of bullish momentum, but technical indicators reveal nuanced dynamics that warrant closer examination.

Candlestick Theory

The recent price surge has formed a series of long-bodied bullish candles, with the most recent session showing a 0.51% close near the high of $137.40. This pattern suggests strong buying pressure, though the absence of a bearish reversal formation (e.g., evening star, hanging man) indicates the trend remains intact. Key support levels are emerging at the 2025-09-29 low of $111.83 and the 2025-09-26 low of $105.42, while resistance is clustered around the 2025-10-01 high of $131.12 and the 2025-10-02 high of $137.40. A break above $137.40 could trigger a retest of the 2025-07-31 high of $78.69, though this would require sustained volume confirmation.

Moving Average Theory

The 50-day MA (calculated from the 2025-07-03 to 2025-10-02 period) stands at approximately $78.14, while the 100-day MA is at $65.83 and the 200-day MA at $60.12. The current price ($131.26) is well above all three, indicating a strong bullish bias in the medium to long term. The 50-day MA crossing above the 100-day MA in mid-September confirmed a medium-term uptrend, and the 200-day MA acting as a dynamic support suggests further upside potential. However, the widening gap between the 50-day and 100-day MA may signal increasing volatility, which could precede a consolidation phase.

MACD & KDJ Indicators

The MACD line (12,26,9) has surged to 15.8, above the signal line of 5.2, with a histogram expanding to 10.6. This suggests accelerating bullish momentum. The KDJ indicator (14,3,3) shows %K at 88 and %D at 82, both in overbought territory. While this may indicate a short-term pullback risk, the divergence between %K and %D (with %K lagging %D) suggests the uptrend remains structurally intact. A crossover of %K below %D below 80 would be a bearish signal, but this scenario is not yet materialized.

Bollinger Bands

The 20-day Bollinger Bands (2σ) have widened to $128.425–$137.40, with the price trading near the upper band. This contraction-expansion pattern indicates heightened volatility, often preceding a directional decision. The mid-band at $132.915 suggests that a pullback to this level could offer a re-entry opportunity. If the price closes below the lower band ($128.425), it may trigger a retest of the 200-day MA as a secondary support.

Volume-Price Relationship

The most recent session saw a 15.3 million share volume, a 23% increase from the prior day, with the price closing at the session high. This volume surge validates the bullish move, as it aligns with the price action. However, the volume profile shows a slight tapering in the last two sessions, which could hint at waning momentum. A sustained volume spike above 20 million shares would be required to confirm the breakout of the $137.40 resistance.

Relative Strength Index (RSI)

The 14-period RSI has reached 72, entering overbought territory. While this does not necessarily signal an immediate reversal (RSI can remain overbought in strong trends), a close below 60 would indicate weakening momentum. The RSI divergence (price highs at $137.40 vs. RSI highs at 72) suggests caution, as overbought conditions can lead to a corrective phase. However, the RSI’s failure to form a bearish divergence (e.g., lower highs) implies the uptrend may persist.

Fibonacci Retracement

Drawing Fibonacci levels between the 2025-04-09 low ($30.57) and the 2025-07-31 high ($78.69) reveals key levels: 23.6% at $64.30, 38.2% at $61.75, and 50% at $54.63. The current price of $131.26 is far above these retracement levels, indicating the trend has moved beyond the primary Fibonacci framework. A retest of the 61.8% retracement level ($50.42) is unlikely unless the trend reverses sharply.

Backtest Hypothesis

The backtest of selling WDC when RSI exceeds 70 (2022–2025) shows a strategy return of 50.15% versus the benchmark’s 36.98%, with a Sharpe ratio of 0.75 and max drawdown of 0%. This aligns with the current RSI reading of 72, suggesting a high-probability trade to exit long positions. However, the confluence of bullish momentum (MACD, KDJ) and strong volume suggests the overbought condition may persist, requiring tighter stop-loss placement. Integrating this strategy with Fibonacci and Bollinger Bands could refine entry/exit points, as the $132.915 mid-band and 61.8% retracement level ($50.42) act as potential targets for a multi-stage trade.