We will round up an interesting week of trading stock options today with a little deviation from an exploration of the options of retail stocks that we have been doing in the last four days. The deviation from the pattern is necessary because of a strong trending pattern that I have observed in the tech sector. I strongly believe that we must act fast and decisively to take advantage of the opportunity offered in this budding trend.
In today’s piece, we will be examining the options of Western Digital Corp (NASDAQ:WDC). Western Digital Corporation with its market capitalization of $24.74B is a developer d manufacturer of storage solutions, which enables people to create, manage, experience and preserve digital content. The Company designs and makes storage devices and home entertainment products under the HGST, WD and G-Technology brands.
Why I am Excited about Western Digital Today
The shares of Western Digital caught my attention after the stock made a new 52-Week high to $109.64 on December 10. The new 52-Week high shows the stock trading at a 41.01% premium to its 52-Week low of $77.75. Interestingly, the recent gain recorded in the shares of Western Digital is not a fluke even as the company’s stock shows a 36.71% gain in the last one year.
It might also interest you to know that shares of Western Digital are trading above the 20, 50 and 200-day moving averages at the current $106.64 trading price. In addition, shares of Western Digital have gained 9.79% in the last one month while making 15 new highs in the same period.
What are the Technicals Saying?
The chart above shows how the shares of Western Digital have traded in the last one year. The chart also attempts to compare the performance of Western Digital in terms of share price against the share price performance of its closest rival, Seagate (STX) and against the broader market as represented in the S&P 500.
You will observe that Western Digital (Blue) has gained an impressive 36.71% in the last one year. By comparison, Seagate has lagged with a 29.74% gain in the last one year while the S&P 500 has gained a mere 13.21% within the same period. In addition, shares of Western Digital sport an RSI of 64.56, which suggests that the stock has some upside potential ahead before it enters “Overbought” levels with an RSI of 70.
Fundamental Reasons to Buy Western Digital
As at 3:47PM when I was writing this paragraph, shares of Western Digital are down 1.91% to $105.98; yet, this trading down is not a good enough reason to be pessimistic about the prospects of Western Digital. In fact, Western Digital boasts strong fundamentals that show that the company is on track to record a stellar performance in 2015.
To start with, Western Digital has a market capitalization of $24.74B; yet, it sports a P/E ratio of 16.59, which is pretty low for a tech company and below the industry average of 21.55. In addition, the company has a Dividend yield of 1.52% and its revenue is expected to grow by .50% this year and by another 1.30% next year.
More so, the company’s earnings is expected to increase by 1.40% this year, by 7.90% next year and experts expect the Earnings to continue at a CAGR of 6.67% over the next five years.
How to Trade WDC Options
I am optimistic about the prospects of Western Digital in the New Year and I recommend buying WDC call options. I am particularly interested in the WDC Apr 2015 100.000 call (WDC150417C00100000) and I think you should get in on the contract at an asking price of $10.25.
— Daily Option Alerts