SanDisk a risk

Sep 8th, 2010 – Comment

Having said that, the chart indicates that the uptrend is broken and SNDK has broken below the 50 day moving average and is testing support on the 200 day moving average.


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Is it time to buy SNDK or wait for further downside?

Gunda

 

Hi Gunda,

Great question. SanDisk Corp.( SNDK NASDAQ) has been very generous for investors who caught the scent and tracked it down earlier. When I examined SNDK back in April of 2010 in an exclusive article I wrote for globeinvestor.com’s Trade by Numbers feature it was clear that the stock had more in the tank In fact it ran another 38% when it topped out in June of this year. Not bad but SNDK generated a nine bagger from the lows of  November of 2008. Now that’s sweet! However that was then, this is now, and the uptrend line has been broken.

 

sndk3

The three year chart is a perfect example of a beautiful, wealth creating uptrend. Look how often SNDK tested support along the 50 day moving average and the uptrend line. That’s a sign of strong investor appetite for the stock. The golden cross that formed in May of 2009 confirmed that a lot of the risk had been taken off the table.

Having said that, the chart indicates that the uptrend is broken and SNDK has fallen below the 50 day moving average and is testing support on the 200 day moving average. Both put a caution flag on the track.

Why the pull back? There was long term resistance at $50. Investors who rode the rocket to that level decided that they would start to book profits and enjoy the fruits of their decision.

 

 sndk4

The six month chart depicts the most recent action. SNDK has caught a bounce off the $34.00 level where it has support and has now regained a hold above its 200 day moving average. The RSI and MACD both signaled a shift in momentum to the upside but there is resistance at $40 which will provide a real test of investor sentiment.

The last two candlesticks on this chart are a concern. The first stick is a doji that indicated that the market was unsure of direction followed by a dark stick that would suggest that selling pressure will follow.

I often think of my capital as a fine thoroughbred. When my steed has won all three races in the Triple Crown would it make sense to schedule the champion in a $10,000 claiming race or put it in the barn for a well earned rest? I think this horse is has done well by its owners and its time to go back to the auction for another yearling.

 Here is a link to the April  “Trade by Numbers” feature at globeinvestor.com

http://www.theglobeandmail.com/globe-investor/e-zines/trade-by-numbers/three-technology-picks-to-light-your-way/article1525265/

Happy Capitalism!

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