Despite the Dow setting an 11 year low last weak and concerns over the HPQ report, STX posted a modest decline for the week. In fact, over the last two weeks STX has outperformed the general market and some major tech stocks, see chart:
We also saw the intoduction of the $4 option series for STX and in the matter of just a few days, over 5000 March $4 put contracts were written. Some have raised this as a concern, but the introduction of the $4 puts and calls reflect that Seagate's previous option series at $2.5 & $5.0 were often outside of Seagate's trading range $3-$5 over the past three months. So it was necessary to open a series near the middle of STX's trading range. We could also see an April option series open up next week.
I should note that during the free fall in STX share price during Friday morning that investors took the "liberty" of trading almost 9,000 March $4 & $5 call options. In fact, there over 23,000 open March $5 call contracts.
So what's ahead?
STX closed the week at $4.19.
The top and bottom Bollinger bands ended the week, respectively, at $4.89 and $3.35 and the 50 DMA is at $4.68. So we are near the middle of the trading range. Some other technical indicators such as Stochastic are turning to over sold. If STX rises or stays near Friday's closing price, the Bollinger bands should both start to rise which could send STX higher.
Fundamentally, while things are still soft they have not degraded significantly over the last month. Remember, Wall Street is looking at the rate of change (derivative) of the situation. Inventories remain low and some drive prices continue to firm.
Outside of a major market collapse or surprise bad news about STX, I still feel it is more likely we will test the upper Bollinger band before we test the lower band again.