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CHART ANALYSIS


Low-Risk Entry For Sandisk Corp.?

11/28/07 08:20:37 AM
by Gary Grosschadl

The world's largest supplier of flash memory data storage products looks like a low-risk buy.

Security:   SNDK
Position:   Buy

Figure 1, a weekly chart, shows the stock price hitting a two-year low, closing at the low of last February's bottom hammer candlestick. The current candlestick is close to a hammer but the tail or lower shadow is a bit short for the classic hammer signal, which ideally has the tail at least twice as long as the real body. Either way, I like the low-risk entry point here.

The indicators displayed do reflect a very early entry point consideration. The moving average convergence/divergence (MACD) still needs to turn up, but this indicator does tend to lag. The relative strength index (RSI) hints at support very near the often telling 30 level.

The stochastic oscillator is in an oversold condition and needs to break above its 20 level before it turns bullish.

FIGURE 1: SNDK, WEEKLY. A low-risk entry can be considered on this chart of the electronics technology company.
Graphic provided by: StockCharts.com.
 
Should this indeed turn out to be a bottom for this stock, several upside targets are anticipated. The overhead 20-period exponential moving average (EMA), currently $46, matches a previous support/resistance level, making this the first upside target. Should this level be broken, the next target is $50, another previous level of support. The most ambitious target is the trendline near $55.


Whether the stock does turn here remains to be seen. The question is whether this is merely a bear rally to the 20-day EMA. The lure of this early entry is to capture a handsome gain, even if it turns out to be a failure move to overhead resistance.



Gary Grosschadl

Independent Canadian equities trader and technical analyst based in Peterborough
Ontario, Canada.

Website: www.whatsonsale.ca/financial.html
E-mail address: gwg7@sympatico.ca

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Date: 11/28/07Rank: 4Comment: 
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