STX has reclaimed two trendlines and held them during recent broad market weakness
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Seagate Technology Holdings PLC (NASDAQ:STX) experienced a crossover at its 320-day moving average on Thursday, taking out its April and May highs in the process. The stock also broke above the $65.31 level, or three times its 2016 monthly closing low. Plus, earlier in the week, STX jumped above its 2018 and 2020 peak areas. Given this strong technical setup, now looks like a good time to weigh in with calls.
Major put buying preceded the rally, and an unwinding of this pessimism could provide tailwinds. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), Seagate Technology stock's 10-day put/call volume ratio of 6.11 ranks higher than 99% of readings from the past year.
A round of upgrades could provide tailwinds as well. STX was downgraded on July 27, but didn't respond to the bear note, and just nine of 26 covering analysts rate the equity a "buy" or better. Further, it would take shorts nearly five days to cover their bets, and they're no longer building positions like they did in the March-through-June 2022 period -- a major contributor to significant decline in price action.
Our recommended call option has a leverage ratio of 8.0 and will double on a 13.5% pop in the underlying shares.