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Disk Drive Index

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Since the Amex Disk Drive Index (DDX.X) is the only technology sector in negative territory today, at least it was when I stared this, lets see what's going on.

Disk Drive Index Daily Chart

The Disk Drive Index has completed a head and shoulders bottom, so why isn't it taking off? If we measure the height of the pattern to get a price projection, we come up with a target of $120. Height of the pattern: 100 - 80 = 20. Add that to the top of the pattern, and we get 120 (100 + 20). So what's holding it back? Placing a retracement bracket on the index reveals that we a stuck at the 50% level around 104.23. The next level of resistance is the 110-112 area, the previous high and 61.8% retracement level. Once those are cleared DDX can move towards the target at 120, or more likely the previous high at $124. We also have moving averages that are turning up, and could support prices in the near future. So what are the individual components doing?

EMC Daily Chart

If you can see through all the lines, EMC (NASD:EMC) is trying to form a base. The first in a slew of overhead resistance points is the previous high and 38.2% retracement bracket around $47.09. By the time prices rise to test that level, the 200-day moving average should have fallen to make it triple resistance. If EMC can fight through that, it has $7 of upside until the 50% level and shorter-term downtrend come into play. The climb gets a little easier after that level is cleared, with only the 61.8% level, and longer-term downtrend left. If EMC falls, $37.50 should support prices. One stock in this group that I have thought about in awhile is Denver based Storage Technology (NYSE:STK).

Storage Technology Weekly Chart

Doh! While I wasn't watching, Storage Tech ran up 60 percent this month. I had to move to a weekly chart to show the double bottom pattern that is getting ready to complete. STK could find resistance at $18 and $20 if it can complete the double bottom, but should soon have some support from the daily moving averages (not shown).

Jeffrey Canavan
Assistant Analyst

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