Breakout Level and Chart for SNDK Daily and Weekly Lessons

Dec 13, 2010: 11:21 AM CST

Sandisk (SNDK) has been an interesting stock and is currently knocking at – or perhaps breaking through – key overhead resistance at the $50 per share level.

Let’s take a look at the current chart picture, note key levels to watch, and the dominant larger-scale “IF/THEN” logic to monitor as the weeks go on from here.

First, SNDK’s Weekly Chart:

Cutting right to the chase, a breakout firmly (for more than a day or two) above the key resistance at $50 could lead to a trend continuation move to the NEXT level of resistance at $60 per share.

The $60 per share level is as simple resistance as it gets – a prior price level from 2007’s high.

Based on the weekly structure, there’s not much above $50 that could cause a change in the supply/demand relationship, at least from the perspective of the pure price chart until the prior level comes into play.

Take a quick look at how this logic has worked in the past from 2009 to present.

After the Multi-Swing Divergence and the lows in 2008, price broke through the 50 week EMA – a key turning point in the weekly trend structure – in July 2009, locking in a breakout and new uptrend classification.

From there, price stagnated at the $27 level, which was the prior price swing high from September 2008.

After firmly breaking that level, the chart gave a clear pathway to target the next prior swing high at the $33 level from the May 2008 high.

Sellers stepped in initially here, as the $33 level converged with the falling 200 week SMA which resulted in a quick pullback to the rising 20 week EMA at $25 (a good spot to enter long).

Soon after, buyers pushed shares up through the resistance level, which cleared the way for ‘theoretically unlimited’ upside potential (as in, no really obvious overhead levels.

Price formed a negative divergence and infamous “Three Push” pattern at the $50 per share level in June 2010 then retracted all the way down to the rising 50 week EMA at $35, which happened to correspond both with the May 2008 high and January 2010 high.

Remember – often times OLD resistance becomes NEW support in the future.

Anyway – that’s a brief, guided history of price as it reacted to key swing highs/levels in the past on its journey up.

If history repeats and buyers firmly push price beyond $50, the next upside level could come in at $60 per share.

A bit of caution – notice the little negative divergences in both volume and momentum … it’s something to watch as a non-confirmation, but price trumps indicators in strong uptrends.

Let’s turn now to a quick glimpse at the Daily Chart to see some recent history:

Price formed and then broke a symmetrical triangle (that’s ‘stretching’ it) recently in November and then shot-up to challenge the prior swing high at $50 per share.

Today, buyers pushed SNDK above $50 to a new 52-week high (and technically new three-year high… not seen since October 2007).

It’s now the buyers/bulls’ game to lose as price has cleared a resistance level.

We still see the negative volume and momentum divergence (notice the similar divergences that preceded the decline from June to September) with price which is a caution signal – but that’s the same pattern showing up in the broader market and NASDAQ index.

Traders keep focused on $50, with a likely bullish stance above, neutral/cautious stance under and if price really does start breaking out here, look for the next weekly resistance level to appear near $60 per share.

Corey Rosenbloom, CMT
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5 Responses to “Breakout Level and Chart for SNDK Daily and Weekly Lessons”

  1. Terlyn12001 Says:

    I think these are all last-ditch moves, but we'll see.

  2. Corey Rosenbloom, CMT Says:

    If they do wind up being traps – and there are more stocks like SNDK doing little breakouts right now – then it could be a violent down-move as everyone's caught long! I'd be more confident in these breakouts if volume and momentum were up but they're generally down across the board. It just means to be much more vigilant and active in trading right now.

  3. Terlyn12001 Says:

    The divergences seem extreme; the TRIN is at its lowest level in a very long time.

  4. Terlyn12001 Says:

    I was watching that $DXY ascending price move and waiting for it to break to the downside, but I notice that the other markets didn't break out at the same time, instead, consolidating. I think that is a non-confirmation as well.

  5. Smpchan Says:

    SNDK like many other stocks or even the indices may be forming a “loosely” defined cup and handle pattern.