Medium term
Trade view / 28 May 2015 at 13:46 GMT

SanDisk stock offers good risk/reward

Trader /
United States
Instrument: SNDK:xnas
Price target:
Market price:

Shares of data storage solutions company SanDisk Corporation (SNDK:xnas) have seen tough slugging so far in 2015, but increasingly are reaching levels where a better bounce could occur. 

Following the company's latest earnings report in April the stock dropped but then quickly settled into an unusually tight trading range that looks to want to resolve in one direction or another, sooner rather than later.

Looking at the multi-year weekly chart of SNDK stock we see that after trading in an orderly channel for several years after the late 2008 lows, the steep rally in 2014 took the shape of a classic overshooting move that blasted the stock out of the channel. 

This as a result needed to be corrected and over the past six months the stock has come crashing down and presently finds itself well in the lower third of the multi-year channel. It's a simple game of probabilities; stocks are better bought at the bottom of trading ranges than at the top of said ranges.

SanDisk Corporation share price 2007-present
SanDisk Corp

Source: Saxo Bank. Create your own charts with SaxoTrader. Click here to learn more  

On the daily chart we see that tight trading range in SNDK stock from the past month and an half more clearly. The tight range has also brought its eight- and 21-day simple moving averages closely together, which the stock however quickly overcame with Wednesday's near 4% rally. 

After Wednesday's strength the onus remains on the bulls to see if they can sustain this new-found upside momentum.   

SanDisk Corp

Source: eSignal

Management and risk description

From a risk management perspective any quick bearish reversal and erasing of Wednesday's rally would negate the near-term setup. In fact, should the stock break below the $65 area a better trade to the short side might set up.


Entry: Buy the CFD at $69 or higher.

Stop: $66.50.

Target: $74.

Time horizon: 2-3 weeks.

— Edited by Oliver Morrison

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Non-independent investment research disclaimer applies. Read more
JulieDeiy JulieDeiy
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