The 2017 chasm between data storage competitors Seagate Technology PLC STX 0.15% and Western Digital Corp WDC 7.54% opened even wider this week following a disappointing earnings report by Seagate.
Seagate shares plummeted 16.5 percent on Tuesday after the company reported declining revenue in the most recent quarter. Western Digital bulls are hoping the divergence in share price between the two companies continues when it reports its own quarterly earnings report on Thursday after the market close.
For years, the two storage giants’ stocks traded with a very high correlation. However, in 2017, the story has been all about Western Digital. The company’s shares are up 36.3 percent year-to-date, while Seagate’s stock has dropped 14.8 percent on the year.
Western Digital shares initially sold off this week on Seagate’s tough quarter, but the stock quickly found buyers and finished Tuesday’s session down less than 1 percent on the day.
The previous correlation between the two stocks and the recent divergence that began following Seagate’s disappointing fiscal third quarter earnings report in April can be seen in the chart below.
If Western Digital reports another solid quarter this week, traders should consider a pair trade by going long Western Digital and short Seagate to attempt to capitalize over Seagate’s lagging performance. That particular pair trade would have netted…
Click here to continue reading
Want to learn more about how to profit off the stock market? Or maybe you just want to be able to look sophisticated in front of your coworkers when they ask you what you are reading on your Kindle, and you’d prefer to tell them “Oh, I’m just reading a book about stock market analysis,” rather than the usual “Oh, I’m just looking at pics of my ex-girlfriend on Facebook.” For these reasons and more, check out my book, Beating Wall Street with Common Sense. I don’t have a degree in finance; I have a degree in neuroscience. You don’t have to predict what stocks will do if you can predict what traders will do and be one step ahead of them. I made a 400% return in the stock market over five years using only basic principles of psychology and common sense. Beating Wall Street with Common Sense is now available on Amazon, and tradingcommonsense.com is always available on your local internet!
