Now Might Be the Time to Jump Ship on Seagate

STX stock could retreat back toward annual lows, if history is any indicator

Digital Content Manager
Jan 15, 2019 at 3:19 PM
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Another negative analyst note has the shares of Seagate Technology PLC (NASDAQ:STX) down 1.2% at $39.63. Specifically, Cowen cut its price target to $40 from $50 today, following yesterday's price-target cut to $33 from $40 at Evercore ISI. STX could run into more pitfalls soon, too, with the stock recently setting off a historically bearish technical alarm. 

Specifically, the security has been in a downtrend since its three-year high of $62.70 in mid-April, but has rebounded from its recent December lows. However, the equity's efforts have put it within one standard deviation of its 40-day moving average after a lengthy stretch below it. In the past three years, STX stock has run up to this trendline five other times, with the shares lower one month later 80% of the time, according to Schaeffer's Senior Quantitative Analyst Rocky White. Seagate stock suffered an average one-month loss of 8.66% after these signals. A similar drop from current levels could erase the stock's recent rebound, pushing it back toward December lows, near $36.23. 

STX since January 2018

Analysts have been leery of Seagate stock, with just two of 17 offering up a "buy" or better rating. Still, the consensus 12-month price target of $46.95 represents an 18.1% premium to current levels, leaving the door open for additional price-target cuts for STX. 

It looks like bears have been hitting the exits on STX's recent rebound, with short interest down 14.8% in the past reporting period. However, these traders haven't completely abandoned their pessimistic positions. The 27.38 million shares sold short still represent a solid 10.7% of the stock's available float.

Near-term options traders, too, are wary of STX. The equity's Schaeffer's put/call open interest ratio (SOIR) of 2.20 indicates that put open interest more than doubles call open interest among options expiring within three months. This ratio is in the 94th percentile of its annual range, implying that short-term traders have rarely been more put-biased during the past year.


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