Shorting SNDK

R

Robert Weinstein

SNDK has been on a tear during this week.

It also is up nine days in a row and has been up 14 days in a row compared to two days before.

I ran some numbers with Stockfinder and could not find one other stock in the last 650 trading days that. Thats almost three three years worth of searching.

Can SNDK go up again tomorrow? Of course it can but I feel the odds greatly favor a retracement. I am already short and I have traded it for the last two days. The first day went alright and I made some money but I traded it back and forth giving me a closeed out loss but a much greater cost basis.

I believe that provided it does start to move down tomorrow it will spend the majority of the day moving lower. Yes I know there has been some good news out (along with a short recomendation by an analyst ). But as they say stocks peak on good news not bad. I intend to short more and perhaps write some calls as I was looking at the Jan 30s

Something to think about if you want to fade a move higher with a short. Of course do your own work with this one. Like I said I am short so I have a bias and while I took some pain today I think if it goes under 26 in short order (three or four days) it will be well worth it.

Happy Holidays to everyone

Robert
 
i shorted yesterday and got burned. planning to do the same today if it opens higher

RSI is over 82.00 plus as u said stock is up 50 % in just 20 trading days

need atleast some pull back. I am not goona buy Jan puts but will go for Feb puts just in case it goes another 1 buck and i can buy more
 
They got an analyst upgrade yesterday, so maybe some more upside before profit-takers step in:

SanDisk Corp. (SNDK, $28.08, +$0.64, +2.33%) is "positioned for a solid 2010 with multiple tailwinds" said ThinkEquity analysts in upgrading the stock to a buy from a hold. The analysts said that pricing for the memory chips may rebound earlier than expected on new products and handsets, especially with the supply low right now. Even with shares up 42% this month, they also predicted there is more room to grow, putting their price target at $35.
 
There seem to be some volatile technology stocks out there that are exploding.

Check out NVDA; up 50% in 2 months 300% in 9 w/o any significant news
 
The probability of three consecutive closes in the same direction is what. 12 1/2%?

Obviously, price has been defying statistical expectation. Not something to flirt with.


Regardless, it's not a short. Might have a little turbulence getting through $30.
 

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took a large loss and exited almost all the shares.

Will look to reenter again if I get a signal.

very little downside just steady unending buying of the stock. I do think it opens and trades lower all through Monday but who knows maybe its a takeover.....

Anyway I took my ass kicking and moving on unless I get another signal.
 
Quote from gobar:

i shorted yesterday and got burned. planning to do the same today if it opens higher

RSI is over 82.00 plus as u said stock is up 50 % in just 20 trading days

need atleast some pull back. I am not goona buy Jan puts but will go for Feb puts just in case it goes another 1 buck and i can buy more
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As a general rule:


Try using rsi 2 with values over 99.7 on the daily as point to sell calls or buy puts.

Also don't short cheap stocks EVER, not EVER. Nothing under $40 bucks, $50 is better.

Don't short stocks that are not heavily owned by institutions. Nothing under 90%.

Don't short stocks that are having a basic change in ownership or equity. For instance don't short stocks with Buyout rumours.

Don't short stocks that are making new 5 year highs. You want some type of Resistance somewhere even if you have to go to the Monthlies to find it.

Don't short stocks that are heavily short.

Don't short stocks on the day that they announce blow out earrings, raise in guidance and stock buy back programs in tandem.

Bullish stocks up big due to a reason such as earnings generally end up closing on high. Consider selling otm calls at eod. They will be cheaper the next day even if prices continues up.

On big expansion days up, you can sell the next day if it gets to 1.414 of the expansion days range if it fits all the criteria mention earlier.

The biggest hits I have seen people take are on shorting cheap stocks and not understanding why the stock is up.

Anyone shorting cheap stocks will get hurt badly sooner or later.

The best scenario that I have found is shorting stocks that fit the criteria are those that had earnings after the market close on the prior day, had significant trading after hours the prior day and gap up the current day. Even better is if they have their press conference this morning. Generally you can get your best price during the conference when its going nuts.

John
 
John, great post, thanks a lot; I printed that one out!

When a stock is hitting highs many days in a row or gaps up a large amount overnight and seems "due" for a pullback, I look at the bigger picture to try to get in the heads of longer term investors, because the institutional traders will drive the price.

I check the annual earnings per share, then the 5-year chart and see how the EPS cmpares to the average price over time.

SNDK's projected earnings for 2009 and 2010 are about 20% less than its earnings in 2007.

Looking at SNDK's 5-year chart, it traded as high as $80 in 2006 and spent most of 2007 trading in the $45-$55 range. So I take a $50 average price, deduct 20% and based on those numbers alone I come up with a target price of $40.

This means that if I choose to short SNDK, it will be strictly intraday (no overnight holds), and will use a tight stop just above the current high of the move up that started to pull back.

This is exactly what I did the other day. I took a few short positions on SNDK when a run up pulled back, and set my stop a couple cents above the high of the move. This limited my losses to $245. Had SNDK staged a solid pullback, I would've had a nice profit.

But if I kept adding to my position at each new run up, assuming it had to pull back before the end of the day, I'd be in that unsavory position of taking a large loss end of day, or holding overnight and hoping for a pullback. Either of those options would've been beyond my allowable loss.
 
stock is in uptrend....
is above 10 day avg.....
don't piss against wind, you will usually lose.

I run a daily scan for stocks based on the same criteria ( I use 7 days up )but stock must be trading below 33 day avg. when MARKET is also in downtrend.
shorting stocks in uptrend while MARKET is in uptrend is bad idea.
you should get 1-3 down days out of it, but I'd look elsewhere.
 
Quote from NoDoji:

John, great post, thanks a lot; I printed that one out!

When a stock is hitting highs many days in a row or gaps up a large amount overnight and seems "due" for a pullback, I look at the bigger picture to try to get in the heads of longer term investors, because the institutional traders will drive the price.

I check the annual earnings per share, then the 5-year chart and see how the EPS cmpares to the average price over time.

SNDK's projected earnings for 2009 and 2010 are about 20% less than its earnings in 2007.

Looking at SNDK's 5-year chart, it traded as high as $80 in 2006 and spent most of 2007 trading in the $45-$55 range. So I take a $50 average price, deduct 20% and based on those numbers alone I come up with a target price of $40.

This means that if I choose to short SNDK, it will be strictly intraday (no overnight holds), and will use a tight stop just above the current high of the move up that started to pull back.

This is exactly what I did the other day. I took a few short positions on SNDK when a run up pulled back, and set my stop a couple cents above the high of the move. This limited my losses to $245. Had SNDK staged a solid pullback, I would've had a nice profit.

But if I kept adding to my position at each new run up, assuming it had to pull back before the end of the day, I'd be in that unsavory position of taking a large loss end of day, or holding overnight and hoping for a pullback. Either of those options would've been beyond my allowable loss.
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Stocks that keep grinding up like Sndk are more dangerous to short then those that have a huge day up. That is because it shows that longer term money is behind it as opposed to those one day wonders.

Notice on SNDK that is it only 80% owned by institutions. That means that there is room for more institutions to come in and participate. It is the institutional buying that gives multiple days up. That's why I like to deal with stocks that are already owned by institutions. They generally are forced to take profits on stocks up huge one day and the buyers are generally Retail.

This is just stuff I have learned over the years. I am not saying I really know what I am doing it just what has worked for me.



John

PS FWIW if you check the monthlies then 36 area is resistance on sndk
 
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