Sunday, December 10, 2006

SanDisk Corporation (Public, NASDAQ:SNDK) Revisited


Last week I posted a bearish flag alert for SNDK. I was day early on the call. In fact the morning after I posted my alert, SNDK gapped up invalidating the setup. However, by the following afternoon SNDK had succumbed to the weakness inherent in the setup and we realized that the previous day's rally was a dead cat bounce. The picture above is the 15 minute timeframe of last week's price action.

Where to next? Since this is third test of the $44.50 support zone, I have to assume that the test failed and we go lower. The first area of support is the recent lows at $43.25. Looking at the daily timeframe below, the near term target is a gap fill at $40.28, but in between those two levels we have another support are around $41.75.

In summary, SNDK is in a bearish trend. Two things need to happen on the daily timeframe in order for the bulls to take interest in the stock again: it needs to catch and hold its 20 day MA; and the RSI has to work its way back up to 50 and hang on that level.

7 comments:

yuxchen@gmail.com said...

Thanks Jamie.

Jamie said...

You're welcome Yuxing.

Yuxing said...

Jamie,

I am buying here @42.35. It looks the gap has been filled and negativity was priced in. The chart remains terrible but I think it could be a long setup, given the fact that:

SNDK is trading at less than 10X cash flow.
It is significantly below the consensus price target, which could trigger some upgrades based on valuation.
Royalty agreement with Hynix would provide immediately estimates revision.
Partnership with MSFT regarding U3 and audio/video player possible.
It could even be a LBO target, given its 1b bankroll and strong cashflow.

It is down the fourth day and I see it at the bottom of the downward line. Looking for resistance around 45.50.

What do you think?

Appreciated in advance.

Jamie said...

Hi Yuxing,

The gap won't be filled until price reaches the high of the July 24th bar, which I believe is $40.28. look at the chart again closely. We may get a short-term technical bounce because the stock is extremely oversold. However, my analysis has not changed. SNDK is still on a path of lower lows with no reversal signal as at yesterday's close on the daily timeframe.

I appreciate all of the fundamental analysis you have done to support your position, however, it is beyond the scope of this blog and I cannot comment.

Notwithstanding any new news, I remain bearish on SNDK.

yuxchen@gmail.com said...

Jamie,

I thought the gap close is July 20 intra-day high of 42.35....

Sorry if that is incorrect. Well, I am hoping it should get some technical bounce so that I can get rid of it.

Thanks.

Yuxing said...

Jamie,

I am sorry that I bother you again. I sold out my long shares of SNDK this morning with a profit. However, after witnessing its failed rally, I thought it would go down further. Therefore I shorted at 42.29. It soon went up and I shorted Dec 42.5 put trying to make some up (I kinda of miscaluculated since the puts will expire 2 days instead of 1 day.) This stock goes up and down during the whole day and close at its low. Since I have covered puts, I can't trade after-hour. Should I be worried at this point?

Thanks in advance.

Jamie said...

Hi Yuxing,

You're very busy! I'm not quite sure I understand all of your open positions especially the options for which I know very little.

Today SNDK carved out an inside bar with a higher low. It looks like price wants to stabalize around this level short-term. I don't know what the strike price for the options is, but use that as your guide.

Good luck!