Monday, December 20, 2010

SNDK Watch

The memory maker SanDisk Corp. (SNDK) showed a 50-day moving average cross above the 200-day moving average. It has in the past week pulled back to the cross-over price level, making it a candidate for entry as a slow trade.

ppspsarmacd obvh-a trend ma20ma50ma200
SNDK $48.87

The point of using a longer-term moving-average crossover is to find an entry point near the beginning of a persistent rise.

In the case of SNDK, it's a bit more complex. A bull crossover occurred in September, and the stock rose to a high in April, before pulling back to a bear cross in October. The recent bull cross marks the resumption of a persistent trend.

So, arguably, a trader entering now is getting aboard late. That's true, of course, except if the price keeps on rising. An argument can be made either way.

Even so, SNDK has the financial attributes of a growth play: A 32.5% return on equity, no debt and steadily increasing revenues.

On the Person's chart, SNDK is trading right below the weekly midline.

Person's Table
ppspps openupper pivotlower pivot
SNDK $48.47 $38.50 nov19 $52.22 +6.9% $47.62 -2.6%

The price has pulled back in four trading days from the swing high set last week, which spiked up from a mainly sideways week-long retrenchment.

Reversal Levels
  • $50.97, +4.3% (swing high)
  • $48.87 --- You are here.
  • $46.70, -4.4% (20-day moving average)
  • $46.46, -4.9% (retrenchment low)

Slow-Trade Rules
My strategy for slow trading uses the 50-day moving average (a quarter) and the 200-day moving average (a year). It has these rules:

a) When the 50-day moving average crosses above the 200-day moving average, open a bull position.

b) When the 50-day moving average crosses below the 200-day moving average, either move to cash or open a bear position.

The short version: 50-day-ma above the 200-day ma = bull phase. 50-day-ma below the 200-day ma = bear phase. Simplicity itself. It is important to note that new positions should be opened at the time the signal is given. If the stock is in the midst of a phase, then keep your money on the sidelines until a new phase kicks in.

For my own account, I tend to trade the bull side only, as I find that to be more reliable over the longer term.

Tim Bovee, Private Trader tracks the trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.

No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decision decisions for his or her own account, and take responsibility for the consequences.

  • h-a trend - Heikin-Ashi trend.
  • obv - On-Balance Volume.
  • pps - Person's Proprietary Signal.
  • psar - Parabolic Stop and Reverse
  • ma20 - 20-day moving average
  • ma50 - 50-day moving average
  • ma200 - 200-day moving average
  • macd - Moving Average Convergence-Divergence

About the glance: The colors indicate the state of each signal.
  • Signal Section:
    • pps, psar, macd: green for bull mode, red for bear.
  • Confirmation Section:
    • obv: green for uptrending, red for downtrending.
    • h-a trend: green for uptrending, red for downtrending.
  • Environment Section:
    • ma20, ma50, ma200: green for above the average, red for below the average.

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