Four Bullish Signals Fire for SanDisk SNDK

Oct 16, 2015: 9:57 AM CST

SanDisk (stock symbol SNDK) shares just triggered four bullish indicators for the stock and I wanted to highlight these for you.

With respect to the recent bullish signals, let’s start with the Weekly Chart:

Two BULLISH Chart Factors Emerge from the Weekly Chart as labeled:

  1. A Lengthy Positive Momentum Divergence
  2. The Break and Cross (close) Above the 50 Week Exponential Moving Average (blue)

When the price of a stock breaks into a trending environment, we typically expect the trend to continue moving in the same direction.

However, all trends must end at some point, and trends usually reverse with lengthy momentum or volume divergences.

We see a positive divergence (identified as a series of lower lows in the price of the stock at the same time a momentum oscillator is forming higher lows, as we see above with the green arrow) developing in SanDisk shares through all of 2015.

We then note two weeks of strong bullish (upward) price action from $50.00 per share to the current $70.00 per share level.

That brings us to point #2 with the Breakout above the Falling 50 Week EMA.

In a trending environment, share prices tend to “bounce” and rally up off from a rising moving average like we saw during the uptrend from 2013 until late 2014.

When price breaks through a moving average – instead of bouncing away from it – then it is a signal of possible trend reversal.

When we combine the Positive Divergence with the Breakout above the Falling 50 Week EMA, a bullish picture develops.

We can see two additional factors from the Daily Chart of SanDisk (SNDK):

The Daily Chart does a better job of giving us clear buy (or sell) signals along with prices to target with our trades or investments.

The Two Bullish Factors from the Daily Chart are the Following:

3. A Bullish Cross-over of the 20 and 50 Day Exponential Moving Averages
4. A Price Breakout and Close above the Falling 200 day Simple Moving Average (Red)

Notice that during the 2015 downtrend in share prices, not only did price remain beneath the falling 20 (green) and 50 (blue) day Exponential Moving Averages, but these averages remained in a Bearish Orientation (the 20 day EMA remained falling under the 50 day EMA).

We see the first Cross-Over of the 20 day EMA above the 50 day EMA which is a bullish signal.

Finally, we see price gapping above – and closing two days now – above the falling 200 day Simple Moving Average (Red).

Many investors will simply note the relationship of price – “Is it beneath or above?” – to the 200 day Simple Moving Average as they identify a trend in motion.

When price crosses beyond the 200 day SMA, an investor might deem the price trend to reverse and thus shift strategies.

Conclusion:

In isolation, we can’t look to any one chart-based factor to tell us that a Trend has – or has not – reversed.

Like any puzzle, we put the pieces together one-by-one and see how the puzzle pieces fit together to provide a message to us.

For now, SanDisk (SNDK) shares are triggering Bullish Signals and will continue to do so AS LONG AS price remains above the current price level near $70.00 per share.

A stock can trick or trap investors with false buy signals, so it’s best not to jump the gun.

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Corey Rosenbloom, CMT
Afraid to Trade.com

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Corey’s book The Complete Trading Course (Wiley Finance) is now available along with the newly released Profiting from the Life Cycle of a Stock Trend presentation (also from Wiley).

There’s always a trade-off between being “too early” and being “too late” to enter a position in a stock that is reversing its trend.

Don’t fret – if SanDisk shares truly have reversed into an uptrend at current levels, we could see future prices travel through the green “bullish pathway” as highlighted on the Weekly Chart which is toward $90.00 per share.

For now, monitor the stock price to ensure it remains above BOTH the 200 day SMA and the 50 week EMA which are overlapping near the $69.00 and $70.00 per share levels.

2 Comments

2 Responses to “Four Bullish Signals Fire for SanDisk SNDK”

  1. SanDisk Triggers Four Bullish Indicators for the Stock Says:

    […] By Corey Rosenbloom […]

  2. Taufeek Says:

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