The document discusses a short trade idea on Seagate Technology (STX) stock. It notes that Seagate announced weaker than expected preliminary Q3 2016 financial results, driving the stock down 11% in pre-market trading. Charts of STX and the S&P 500 are presented, along with trade strategy details such as looking for continuation of the down move on STX and adding to positions at important support levels. Management guidelines emphasize using multiple time frames and technical levels to enter and exit the trade.

1. STX
Day 2 Continuation Swing
Short
ESu
4/15/16
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No relevant positions
Please note: Hypothetical computer simulated performance results are believed to be accurately presented. However, they are
not guaranteed as to accuracy or completeness and are subject to change without any notice. Hypothetical or simulated
performance results have certain inherent limitations. Unlike an actual performance record, simulated results do not
represent actual trading. Since, also, the trades have not actually been executed; the results may have been under or
over compensated for the impact, if any, of certain market factors such as liquidity, slippage and commissions.
Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight.
No representation is being made that any portfolio will, or is likely to achieve profits or losses similar to those shown.
All investments and trades carry risks.”
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3. Big Picture
• Yesterday Seagate announced selected preliminary financial information
for Q3 of FY16. Seagate expects to report revenue of approximately
$2.6 billion and non-GAAP gross margin of approximately 23% for the
fiscal third quarter 2016. These preliminary results compare to the
Company’s previous forecast for fiscal third quarter 2016 of revenue
of approximately $2.7 billion and non-GAAP gross margin of
approximately 25.6%.
• The difference in the Company’s revenue and non-GAAP gross margin
from its forecast was driven primarily by reduced demand for traditional
mission critical HDD enterprise products, reduced demand for the
company’s systems and silicon products, reduced demand for desktop
client products primarily in China, and the Company’s decision to not
aggressively participate in the low capacity notebook market.
• Investors do not like margin compression and reduced demand, especially
for a company’s core products; stock opened down ~11%
• Extremely bearish LT chart
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4. Intraday Fundamentals
• ATR: 1.7
• Avg vol: 6.2M
• RVOL: 2.9
• Float: 294M
• Short float: 12%
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5. Trade Strategy
● Look for continuation to the downside; entry should be against resistance
below yesterday’s low with stop above it
● Get bigger in the trade or add momentum lots below important levels
(e.g., VWAP and the ~26.20 52-week low)
● Take off the trade into a steep downmove or consolidation above support
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6. SPY Daily
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7. STX 2-Day Chart
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8. STX Intraday
Yesterday’s low
52-week low
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9. Trade Management
Initial entry below yesterday’s LOD/technical pattern with stop
at the whole #
Add against VWAP
Momentum lot below
~26.20 52-week low
Partial covers into steepness
and consolidation
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10. Trade Review
● The important LT, 2-day, and intraday levels are clearly defined; just
play off them and cover if they’re not being respected
● Don’t overreact to the tape -- unless there’s an all-day selling pattern
just use it to time entries and exits
● Remember to use multiple timeframes
● Stay with the trade and keep pushing the stock until it stops working
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