STX: Trend-Trend PlayTim McClureJanuary 9th, 2013

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Trend-Trend Fundamentals- Trend-trend plays are plays in which the stock is trending in the same direction on both the long-term and short-term time frames You're using the long-term trend as a confirmation or check in your favor to play the short-term trend.

- For example, if a stock is showing strength on the long-term chart, and a positive catalyst is released for the stock, the strength of the stock overall will increase the probability of long setups on an intraday basis. When reviewing stocks, you must identify the context of the stock on a longer term time frame and use this to inform your decisions when making your trading plans and executing your trades.

- When you have a stock trending clearly on the long-term chart, look for clear levels to trade off of and watch for confirmation to enter your position (the tape, the market, etc.). When making a trade in the direction of the overall trend, you can be a little more aggressive than you would be if trading counter to the trend or with a stock that is stuck in a long term range or consolidation.

- This is the type of trade where you can be more aggressive with more size. You really need a concrete and clear Reason2Sell before exiting your position, as these setups can produce outsized moves in the direction of the trend.

Trend-Trend Fundamentals- Reasons2Sell: Clear break of the trend intraday, negative catalyst released, stock hits your exit price, and major technical support/resistance levels.

- Other factors to consider are the overall market, large sellers or buyers, intraday levels, changes in the buying/selling pattern, conference calls, economic reports, and sector strength/weakness. However, the appearance of any of these doesn't mean you should hit out of the stock immediately. The strength or weakness of the stock on the long-term chart combined with the short-term, intraday trend can be enough to override these factors (the following play is an example of this).

Big Picture

Consolidation after fiscal cliff deal above 145.00...

After an initial drive higher off the Open, SPY trended downwards for the rest of the day, breaking through the rising channel formed yesterday. There were no important economic releases. This was not a market play.

Intraday FundamentalsSTX announced 01/08 after the close that they expected revenues to come in higher than previous guidance, and they also detailed a share buyback program:

Tuesday, January 8, 4:24 PM Seagate (STX) +1.9% AH after stating it expects to report FQ2 (Dec. quarter) revenue of at least $3.6B, above prior guidance of $3.5B and a consensus of $3.53B. Gross margin is expected to come in at 27%, down

from FQ1's 28.4%. Seagate adds it bought back a whopping 30M shares in the quarter; it repurchased 20.5M shares in FQ1, and 139M in the whole of calendar 2012.

The raised guidance and large share buyback both change analysts and investors' expectations of the company's valuation, an excellent catalyst that can lead to large moves in the stock price.

ATR: 1.00Beta: 2.38Short Float: 12.97%ADTV: 8.84MToday's Volume: 17.97M

Seagate Technology PLC | Technology | Data Storage Devices

Technical Analysis

STX has been in a strong uptrend, especially since mid-2011, on the long-term chart.

Previous higher-low made at the end of November, now in the next leg up to the previous high. The levels I'm looking at are 32.00 and 33.50.

Was bidding in front of 32.00 and got hit for ½ the size I was looking for...

This was the opportunity to get the size that I missed at the whole (or even more) when it begins to hold above 32.20 & VWAP

Clear selling here at 32.70, and this turns out to be an important intraday level going forward...

Exit position when initial trend breaks.

Bought back when it pulls into VWAP and there's clear buying on the tape right here. The counter-trend is broken.

Once it gets above 32.70, it begins to range between 32.70 x 33.00. I scalp the range a bit, buying more at 32.70 and selling as close to the top of the range as possible, but exit completely when the buyers at 32.70 drop.

The reason I exit here is because 1) there were clear buyers at 32.70 and they dropped; and 2) the stock was unable to get back up to the previous high at 33.00. Although I was completely out at this point, I also kept in mind that this was midday, the strength in the stock may not be over, so I kept my eye on this to see if it would be able to get above 33.00

After the initial drop, it begins to make a series of higher lows and a larger uptrend forms midday.

By 14:00, this has become a great breakout setup. The stock has 1) gapped up and holding higher; 2) formed a larger uptrend; 3) tightened against the 33.00 level; and 4) we're transitioning from midday to the Close.

The sellers at 33.00 finally lift and the tape really changes at this point. The volume starts pouring in, and you can tell that there's a lot of money flowing into the stock from the tape. I paid for some on the initial break, then paid for more when large sellers @ .05 were taken out rather aggressively.

I sold a little when I saw some selling on the tape above .10c, but this is where I should've really loaded up. This is a great setup, and I could've had much more size here when it clearly holds higher above the breakout level. The stock never returns to 33.00

There were several large sellers here at 33.50, and after failing there, I exit the position

Trade Review• My #1 mistake with this trade is my size. This was an A+ setup and I should've had much more

than I did at several points during the trade. I could've had more at 32.00, when it began to hold 32.20, when it broke out above 33.00, and especially when it held above the breakout price @ 33.10.

• I'm glad that I bought back after exiting when the initial trend broke. I think that if I had more size, I could've just lightened up there and then added back on the pullback. I don't like to exit a position completely when an initial opening drive trend breaks because it's still a strong stock and we're in price discovery mode right off the Open.

• I'm not 100% sure if I did the right thing by exiting the position completely when 32.70 broke down. Maybe I could've held a little of my position and given it more room.

Trade IdeaThis was a great setup and the stock showed a lot of strength today, so I'll definitely be looking for continuation above 33.50 tomorrow, with 33.00 as support.