Western Digital Surges 22.86% on 5-Day Winning Streak Technical Indicators Signal Strong Bullish Momentum

Western Digital (WDC) has experienced a 5-day winning streak, with a cumulative gain of 22.86% in the most recent session. The price action suggests a strong short-term bullish bias, supported by elevated volume levels and a series of higher highs and lows. This pattern aligns with the "higher high, higher low" structure, indicating a potential continuation of the uptrend. Key support levels to monitor include the $117.45 intraday low from September 30 and the $105.42 low from September 26, while resistance is likely to be tested near the recent high of $136.21 on October 3.

Candlestick Theory

The recent price action features a series of bullish candlesticks, including a long white candle on September 29 (9.23% gain) and a strong reversal pattern on October 1 (8.77% gain), which may signal a shift in sentiment from bearish to bullish. The absence of significant bearish shadows in recent sessions reinforces the dominance of buyers. However, the price remains within a tight range between $128.43 and $137.40 in the past week, suggesting a potential consolidation phase.

Moving Average Theory

Short-term momentum is supported by the 50-day moving average (currently above $130) crossing above the 200-day MA, forming a "golden cross" that historically signals a bullish trend. The 100-day MA at $125.30 acts as a dynamic support level, with the price consistently holding above it. However, the 200-day MA at $118.70 may act as a critical psychological barrier for further upside, as a break above this could trigger a retest of the $137.40 high.

MACD & KDJ Indicators

The MACD histogram has turned positive in the past week, with the MACD line crossing above the signal line, confirming short-term bullish momentum. The KDJ oscillator shows K at 85 and D at 78, indicating overbought conditions. A bearish crossover in the KDJ could signal a near-term pullback, but this must be validated by price action. Divergences between the MACD and price are minimal, suggesting alignment between momentum and directional bias.

Bollinger Bands

Volatility has expanded recently, with the bands widening to a range of $129.93–$136.22 on October 3. The price is currently near the upper band, a classic overbought condition, which increases the likelihood of a reversion toward the 20-day MA at $133.50. The narrowing of bands in the prior week (e.g., $117.45–$122.59) suggests a period of low volatility, which may now be giving way to a breakout phase.

Volume-Price Relationship

Trading volume has surged to multi-month highs, with the October 1 session recording 18.5 million shares traded. This aligns with the price’s 8.77% jump, validating the strength of the bullish move. However, the recent 0.04% gain on October 3 occurred on reduced volume (8.47 million shares), which may indicate waning momentum. A sustained increase in volume during upward moves would strengthen the case for a continuation pattern.

Relative Strength Index (RSI)

The 14-day RSI is currently at 72, hovering near overbought territory (>70). This suggests the stock may be due for a corrective pullback, though the RSI has remained above 60 since mid-September, indicating sustained bullish pressure. A drop below 65 would signal caution, but a break above 75 could validate a new overbought phase.

Fibonacci Retracement

Drawing retracement levels between the September 26 low ($105.42) and the October 1 high ($131.59) identifies key levels at 38.2% ($120.06) and 61.8% ($113.34). The price has tested the 38.2% level multiple times in the past week, with the 61.8% acting as a potential support zone if the current rally stalls.

Backtest Hypothesis

A strategy based on buying WDC when the RSI exceeds 70 and selling when it falls below 70 from 2022 to the present yielded a 31.72% return, underperforming the benchmark by 5.26 percentage points. While the strategy’s maximum drawdown of 0% and Sharpe ratio of 0.56 highlight its risk-managed nature, its conservative volatility (13.60%) and reliance on overbought/oversold signals suggest it may not capture the full extent of strong trends. This aligns with the current RSI reading near 72, where the strategy would trigger a sell, yet the confluence of bullish candlesticks, moving average alignment, and elevated volume implies a higher probability of trend continuation. Traders might consider combining RSI signals with Bollinger Band or MACD confirmations to refine entry/exit timing.