Hard drive manufacturer Western Digital (Nasdaq: WDC) has been trending lower for over eight months now and the stock has formed a trend channel around the cycles. The upper rail of the channel is in close proximity to the stock’s 50-day moving average and that could make it even more difficult for the stock to break out of the down trend.
The stock peaked back at $104.80 back on March 16 before falling to a recent low of $40.58. That is a drop of 61.3% from the high to the low. For you Fibonacci fans, that is close to the Fibonacci retracement of 61.8%.
The stock went through a similar drop from December ’14 through May ’16. During the selloff the stock dropped from $102.53 to $32.59. After hitting that low in 2016, the stock rallied to the all-time in March.
The fundamentals are a bit of a mixed picture for Western Digital. Earnings have been declining recently with the most recent quarter showing a drop of 15%. Analysts expect the earnings to decline by 51% for the year as a whole.
On the other hand, the profitability measurements are really good. The return on equity is currently at 39.4% and the profit margin is at 23.2%.
It’s hard to tell how much further the stock could fall. The low from 2016 could come in as support, but that is another 28.4% drop from where the stock closed on Thursday.