NEW YORK ( TheStreet) -- Seagate dropped just over 3% Tuesday with the help of a healthy uptick in volume. The drop pushed shares to new May lows as downside trade reached its heaviest level since the early March flush. STX looks very vulnerable now and will likely head lower in the near term.
This month's high, which followed a powerful 17% rebound off the April 1 low, was marked right at its downward-sloping 200-day moving average. The stock immediately reversed as May began, leaving behind an ominous short-term top at the April peak. Over the last two weeks, STX consolidated as volume dried up. That short rest, which straddled the 50-day moving average, ended with today's big selling wave.
It's likely more downside is ahead for STX. But for patient investors, a very low-risk entry opportunity will be the result. A continued drift back down to the $51 area will retest a major support zone. Back in October of 2014, STX left behind a powerful spike low near $50.50. The April 2015 bottom, also of the spike variety, was put in just above $51. In addition, shares will again return to oversold territory as this key zone comes into play.