Rolling Stock Long Trade With Earnings

Western Digital (WDC) is a current rolling stock for a long trade ahead of its earnings release this week. Quite simply, when component costs for companies like Apple are going higher, hard disk drives are often one of the culprits. They don’t have hard drives in iPhones, iPads, or iPods, but they do have them in Macs. They are also in digital video recorders, and there a bunch of them in server farms for cloud computing. They’ve become mainly a commodity so when one hard drive maker is seeing positive results, it generally means the others are too. In this case, Seagate Technology (STX) pre-announced revenue above estimates and that implies good results from Western Digital as well. Since Seagate’s pre-announcement, the consensus earnings estimate for Western Digital has ticked higher by a penny to $1.82 per share, meaning analysts really haven’t factored the new news into estimates yet.  We think, $46 is the current resistance and the safer trade is to trade a move through resistance, but with estimates still likely going higher, we would prefer to be in the name ahead of the upward estimate revisions, and that should push the stock above $46.

Western Digital is scheduled to report earnings after the market closes on Wednesday, July 23, 2013.

Western Digital

Western Digital - Resistance at $46.00

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