Go Western Digital, Young Man

We have talked about the resurgence of the technology sector several times over the last couple of months. On Wednesday, we saw another indication that things are turning around in this group and that demand for technology products may be on the upswing.

Seagate Technologies (STX Quote), one of the largest disk-drive manufacturers, upped its fiscal first-quarter earnings projections by 50%, as hard-drive prices increased amid strong PC demand.

Seagate's announcement suggests that the entire disk-drive sector is seeing better pricing, as well as strong unit demand, which also implies that technology spending is up across the board. Disk drives are one of the basic commodities of the technology sector, and the idea that consumption is exceeding supply bodes well for hardware manufactures.

The improvement in disk-drive demand appears to be coming from an increase in basic technology, such as personal computers, and not from new consumer product introductions. It seems that "old-fashioned" technology products are selling well.

Seagate Technology

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The charts are supporting this conclusion. Traders should take a look at the long-term weekly charts for both Seagate and Western Digital (WDC Quote).

Western Digital is the second-largest disk-drive manufacturer behind Seagate. Both stocks have emerged from long-term weekly base formations, and both are consolidating over support. The chart for Western Digital is actually better-formed and more cohesive than the chart for Seagate, but both formations are bullish.

Western Digital

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These are large and significant long-term base formations. Judging by the look of these charts and the improving fundamental backdrop, we would expect to see a new primary uptrend emerge in the coming weeks and months. Traders should pick these names up at these levels and let the uptrend develop. The group may see a couple of false starts when we consider the volatile market backdrop, but both names are bullish buys right here.

Traders should also consider what strong fundamental data coming from commodity technology companies such as Seagate means for the broader technology sector.

If Seagate and Western Digital are selling more hard drives, that means that PC shipments are up, which is good for Hewlett-Packard (HPQ Quote) and Dell (DELL Quote). If PC shipments are up, it also bodes well for Intel (INTC Quote) and Advanced Micro Devices (AMD Quote).

When we see strength in one of the most basic commodities in the sector, it may be time to look around the entire group for strength.